Last updated: 27 Jan, 2021 | 02:59 pm
Profit declines due to higher provisions: The net profit declined by 36% on-year to Rs 1,117 crore in Q3FY21, impacted by higher provisions. Analysts had earlier anticipated a profit of about ₹2,356 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 grew 14% YoY to Rs 7,373 crore. Analysts had earlier anticipated a net profit of about Rs 7,450 crore. Net interest margin stood at 3.59% for the quarter.
Asset quality improves: The bank's asset quality improved with the gross non-performing asset ratio reducing to 3.44% of total advances as against 4.18% in Q2. Net NPA ratio for the bank fell 24 basis points to 0.74%. Provisions in the quarter under review increased 32.7% year-on-year to Rs 4,604.28 crore.
Update on moratorium: The RBI had permitted banks to offer a moratorium to borrowers until the end of August to help them mitigate the impact of the pandemic. Following this, the Reserve Bank of India in September permitted one-time restructuring of advances of companies and retail borrowers hit by the Covid-19 pandemic. While these assets don't have to be marked as NPAs, banks have been asked to disclose details of the restructured assets.
Axis Bank said that if the bank were to account for classified borrower accounts as NPAs after August 31, the gross NPA would have been 4.55% (as against 3.44%) for December quarter. The Net NPA ratio would have been 1.19% (as against 0.74%). The bank has written off loans worth Rs 4,258 crore during the third quarter.
The restructured loans as at 31st December, 2020 stood at Rs 2,709 crore that translates to 0.42% of the gross customer assets.
Deposits: The bank's deposits aggregated to approximately Rs 6.54 lakh crore as of Dec-20, a growth of around 11% on-year. Axis Bank's CASA (current and savings account) deposit now comprise 42% of 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. Advances were up 6% on-year to Rs 5.82 lakh crore.
The bank's profitability has been impacted due to a steep rise in loan loss provisions. During the quarter, the bank made specific loan loss provisions of Rs 1,050 crore. About 83% of the slippages during the quarter came from the retail segment, which included both secured and unsecured accounts. The bank is following a conservative strategy by keeping higher provisions and focusing on the secured lending portfolio. About 83% of the fresh loans disbursed since December have been toward secured loans. Going forward, the company expects fourth-quarter slippages number to improve from the December quarter.