Axis Bank Q4 results: Profit, NII, Margins, Asset Quality and more

Profit beats estimates: Axis Bank's net profit increased to Rs 2,677 crore in Q4FY21. Last year the company reported a net loss of Rs 1,388 crore - compared to it, Q4FY21 numbers are exceptional. The analysts had estimated net profit at around Rs 1,912 crore.

Net interest income rises: A bank’s primary business is to borrow money and lend the same at a rate higher than the rate at which they borrowed. The income generated from this differential is known as net interest income. Net interest income for Axis Bank rose 11% YoY to ₹7,555 crore, against the Rs 7,011 crore forecast.

Asset quality improves: Axis Bank's asset quality improved with the gross non-performing asset ratio reducing to 3.7% compared to 4.55% as of December 31, 2020. The net NPA ratio also improved by 14 basis points sequentially and stood at 1.05%. The bank has issued a word of caution and mentioned that there could be a possible drop in collection efficiency over the next few weeks due to the current situation.

Restructured Loans: The bank has restructured loans worth Rs 844.6 crore as part of the Reserve Bank of India’s one-time restructuring scheme. It includes corporate loans worth Rs 340.89 crore and retail loans worth Rs 504 crore. The bank has received total restructuring requests worth Rs 3000 crore from the borrowers. It has time till June end to act upon it.

Deposits: The bank deposits are up by 10% over last year and stand at Rs 7.07 lakh crore. The bank’s advances stood at Rs 6.24 lakh crore, up 9% year-on-year. The retail loans stood at Rs 3.34 lakh crore and are up by 10% year on year. Led by secured loan products, the retail loan disbursement is at an all-time high. Retail loans account for 54% of the total loan book. The corporate advances rose 7% year-on-year to Rs 2.19 lakh crore.

CASA: Bank’s CASA (current and savings account) deposit comprises 42% of the total deposits of the bank. They were at 39% last year. CASA capital is the cheapest source of capital for banks. The higher the number, the more profit a bank can earn. 

Capital Adequacy: The Capital Adequacy Ratio (CAR) and CET1 ratio, as of March 31, 2021, including FY'21 profits were 19.12% and 15.40%, respectively. The bank has also held Rs 5,012 crore of COVID-19 provisions, not considered for CAR calculation providing a cushion of 69 basis points over the reported CAR. 

Commentary: The bank will continue to grow its retail loan portfolio with a focus on secured lending products. It will continue to lend to unsecured borrowers, however, it will be cautious and deal only with customers who meet its risk standards. The board has also authorized the bank to raise funds in Indian or foreign currency by issue of debt Instruments including but not limited long term bonds, non-convertible debentures, perpetual debt instruments, AT 1 Bond, Infrastructure Bonds, and Tier II Capital Bonds up to an amount of Rs 35,000 crore.