Lender regains profitability through growth in basic income
Axis Bank Ltd. returned to profitability during the quarter ended in September thanks to an increase in its core revenues.
The private lender’s net profit amounted to Rs 1,683 crore in the three-month period, compared to a net loss of Rs 112 crore a year ago. On a sequential basis, profit jumped 51%.
The bank’s net interest income, or income base, increased 20% year-on-year to Rs 7,326 crore. The metric stood at Rs 6,985 crore in the quarter ended in June. Analysts polled by Bloomberg had estimated that Axis Bank would report net income of Rs 1,476 crore and net interest income of Rs 6,305 crore.
Asset quality improved in the second quarter, with the gross non-performing asset ratio falling to 4.18% from 4.72% in the June quarter. The net NPA ratio declined 25 basis points sequentially to 0.98%.
The bank said it followed the Supreme Court’s interim order in Gajendra Sharma v / s Union of India and had not classified some accounts as NPA since August 31. If the interim order was not in place, Axis Bank’s gross NPA would have been 4.28%, while its net NPA would have been 1.03%, as on September 30.
Axis Bank made cumulative provisions worth Rs 4,580 crore during the three-month period, an increase of 3.7% from the previous quarter. As he addressed the media on a conference call following the earnings announcement, Amitabh Chaudhry, the lender’s managing director and general manager, said he made additional arrangements worth 3,143 rupee crores during the quarter.
“Of that amount, 25% is for routine downgrades and the remainder for accounts subject to restructuring,” Chaudhry said. “We now hold a provisioning buffer worth Rs 10,839 crore against any possible slippage in the future. “
The bank has set aside provisions worth Rs 1,886 crore for accounts that may be restructured in the future, as part of the Reserve Bank of India’s unique restructuring plan announced on August 6. According to Chaudhry, the amount of the restructuring was determined by internal modeling, however, no restructuring requests were pending with the bank as of September 30.
“We are clear that we expect restructuring requests to arrive before December,” Chaudhry said. The deadline for invoking the single restructuring plan ends on December 31, after which banks have 180 days to implement it.