Last updated: 27 Jul, 2021 | 04:41 am
Profit in-line with estimate: Axis Bank's net profit increased to Rs 2,160 crore in Q1FY22, an 94% increase year-on-year. Analysts had earlier estimated a net profit of about Rs 2,242 crore. As compared to the previous quarter, the net profit is down 19%. The bottomline was aided by higher fee income.
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 Rs 7,760 crore, against the Rs 6,895 crore in the last year. The Net Interest Margins (NIM) for the quarter ending June was 3.46%. Fee income stood at Rs 2,668 crore, up 62% year-on-year.
Asset quality falls sequentially: Axis Bank's asset quality worsened with the gross non-performing asset ratio rising to 3.85% in this quarter. Last quarter the gross NPA reported was 3.7%. Net NPA ratio worsened by 15 basis points sequentially to 1.2%. Fresh slippages rose 23% over Q4FY21 to Rs 6,518 crore.
Restructured Loans: The bank has restructured loans worth Rs 2,124 crore as part of the Reserve Bank of India’s one-time restructuring scheme. It includes corporate loans worth Rs 1,620.5 crore and retail loans worth Rs 504 crore. The bank holds provision of Rs 440 crore against these loans. Axis Bank said that Rs 719 crore loans are approved for restructuring under RBI's extended one-time scheme.
Deposits: The bank deposits are up by 16% over last year and stand at Rs 7.14 lakh crore. The bank’s advances stood at Rs 6.15 lakh crore, up 12% year-on-year. The retail loans stood at Rs 3.3 lakh crore and are up by 14% 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 8% year-on-year to Rs 2.25 lakh crore. Of the total corporate loans, 94% were sanctioned to companies rated A- and above.
CASA: Bank’s CASA (current and savings account) and retail term deposit comprise 83% of the total deposits of the bank. CASA capital is the cheapest source of capital for banks. The higher the number, the more profit a bank can earn.
Mastercard Ban Impact - The company has said because of the Reserve Bank of India curb on Mastercard, the new card issuance will be affected by 17-18% each month. However, the company believes the situation will normalize by mid of September as the bank brings other card networks to issue more cards. The bank has a co-branded card with Flipkart with a Mastercard network. The issuance of this card is certainly impacted for now.
Capital Adequacy: The Capital Adequacy Ratio (CAR) and CET1 ratio, as of June 30, 2021, including Q1 profits were 19.01% and 15.42%, respectively. The bank holds cumulative provisions of Rs 12,425 crores at the end of Q1FY22. It has not utilized any Covid provisions during Q1FY22.
Axis Bank Q1 results: review
Axis Bank has reported a steady set of numbers for the Apr-Jun 21 period, in the context of the impact of second wave during the period. The bank’s Net interest margins declined in the quarter, and it also saw higher slippages. Going forward, analysts expect retail stress to normalise in the second half of the year, leading to an improvement in the bank’s Pre-provision operating profit. The net slippages should also see a decline, due to lower gross slippages and higher recoveries as the economy recovers.
Axis Bank Q1 earnings: Brokerage action
Most foreign brokerages have retained their positive stance on Axis Bank following the Q1 results. CLSA has a target price of Rs 1,050 on the shares. The brokerage house believes that the valuation is reasonable for a 15% Pre-provisioning Operating Profit growth and a 15% RoE. Morgan Stanley has a target price of Rs 1,000 on the stock. The research house noted that it expects strong future earnings from lower credit cost and better PPoP.