High provisions drag Axis Q3 net down 36%

High provisions drag Axis Q3 net down 36%

Mumbai: Axis Bank Wednesday posted a 36 per cent drop in its net profit in the three months to December as provisions, beyond the gross bad loans identified at the private-sector lender, surged about a third in a quarter that saw demand revival in key industries undergirding infrastructure.

Profit declined to Rs 1,116 crore from Rs 1,757 crore in the same period last year. Provisions in the quarter increased 33 per cent to Rs 4,604 crore against Rs 3,470 crore in the year-ago period. Out of this, specific loan-loss provisions for the quarter were at Rs 1,053 crore.

“Demand in crucial sectors like housing, cement, steel, even automobiles, have turned out to be surprisingly strong and the rural markets have continued to perform very well,” said Amitabh Chaudhry, MD, Axis Bank. “We expect this momentum to continue into FY22 and the forthcoming Budget should look to build on these strengths. We are very well poised to support, grow and benefit from this recovery.”

Net interest income (NII), the difference between the interest earned and that paid on deposits, rose 14 per cent to Rs 7,372.7 crore at the end of the quarter under review. The bank had reported NII of Rs 6,452.98 crore in the same period last year.

The bank reported improvement in its asset quality metrics, with gross non-performing loan ratio coming in at 3.44 per cent in the December quarter versus 5 per cent a year ago. The net NPA ratio also improved to 0.74 per cent versus 2.09 per cent in the same period last year.

The lender also said that if it had classified the assets more than 90 days overdue as NPAs, if not for the Supreme Court’s interim order of standstill on the classification of assets, its gross NPAs would have stood at 4.55 per cent and net NPAs would have stood at 1.19 per cent.

The lender also has made provisions on accounts overdue more than 90 days but not classified as bad loans, as per central bank norms. Provisions against these accounts were Rs 3,899 crore during the quarter. The bank now holds cumulative provisions of Rs 11,856 crore at the end of December quarter.

“All provisions put together are 116 per cent of the entire GNPA book; so if that’s the dimension of risk, we are covered in excess,” said Puneet Sharma, CFO, Axis Bank.

The reported gross slippages for the quarter were almost nil since the entire quarter was subject to the standstill benefit following the Supreme Court decision. Although as per the income recognition norms, gross slippages during were Rs 6,736 crore.

Recoveries and upgrades from NPAs per IRAC during the quarter were Rs 905 crore, while write-offs were Rs 4,258 crore. Restructured loans at the end of the December quarter stood at Rs 2,709 crore, translating to 0.42 per cent of the gross customer assets.

The total loan book increased 9 per cent including investments made through the targeted long-term repo operations carried out by the RBI. This was largely contributed by retail loans, which grew by 9 per cent and recorded the highest ever quarterly disbursements.

“Retail disbursements are the highest we have seen. If we are able to record the similar run rate we had seen in the December quarter, obviously we will see healthy growth in the fourth quarter,” Chaudhry added.

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