Axis Bank Q2 takeaways: Provisions drop sharply, asset quality improves

NEW DELHI: Axis Bank came back in black for the September quarter led by sharp drop in provisions and strong growth in advances, especially, retail portfolio. Fee income also registered modest gains.

The company also saw a sharp improvement in asset quality, which is a good sign given the moratorium period has ended and now bad loans may rise.

Here are key takeaways from the earnings announcement:

How much did the company earn?
Axis Bank reported net profit at Rs 1,682.67 crore. The net interest income rose 20 per cent year-on-year (YoY) to Rs 7,326 crore. The net interest margin (NIM) stood at 3.58 per cent.

What was the growth in fee income?
Fee income for Q2 stood at Rs 2,752 crore, growing 67 per cent QoQ and 4 per cent YoY. The key driver of fee income growth was retail fees, which grew 82 per cent QoQ and constituted 62 per cent of the bank’s total fee income. Corporate and commercial banking fee grew 46 per cent QoQ and 10 per cent YoY.

The trading profits and miscellaneous income for the quarter stood at Rs 769 crore and Rs 286 crore, respectively. Overall, non-interest income (comprising fee, trading profit and miscellaneous income) for Q2 fell by 2 per cent to Rs 3,807 crore from Rs 3,896 crore last year.

How much did it provide for contingencies?
Specific loan loss provisions for Q2FY21 were Rs 588 crore, compared to Rs 2,701 crore in Q2 last year. The bank held additional provisions of around Rs 6,898 crore towards various contingencies at the end of Q1. It made incremental provisions of Rs 1,279 crore towards loans under moratorium and Rs 1,864 crore towards probable restructuring, aggregating to Rs 3,143 crore.

“It is pertinent to note that this is over and above the NPA provisioning included in our PCR calculations, and the 0.4 per cent standard asset provisioning requirement on standard assets. The overall additional provisions held by the Bank towards various contingencies together with the standard asset provisions, translate to a standard asset coverage of 2.20 per cent,” the lender said in a statement.

How is the balance sheet positioned?
The bank’s balance sheet grew 12 per cent YoY and stood at Rs 9,09,463 crore as on September 30, 2020. The total deposits grew by 13 per cent on quarterly average balance (QAB) basis and by 9 per cent YoY on period-end basis.

The bank’s balance sheet grew 12 per cent YoY and stood at Rs 9,09,463 crore. The total deposits grew by 13 per cent on quarterly average balance (QAB) basis and by 9 per cent YoY on period-end basis.

The bank’s advances including TLTRO investments grew 14 per cent YoY to Rs 5,94,461 crore. The bank’s loan to deposit ratio stood at 91 per cent. Retail loans grew 12 per cent YoY to Rs 3,05,685 crore and accounted for 53 per cent of the net advances of the bank.

How is the quality of assets?
As on 30th September 2020, the bank’s gross NPA and net NPA levels were 4.18 per cent and 0.98 per cent, respectively, as against 4.72 per cent and 1.23 per cent as on 30th June 2020. The bank has recognised slippages of Rs 931 crore during Q2, compared to Rs 2,218 crore during Q1 and Rs 4,983 crore in Q2FY20. Slippages from the loan book were at Rs 741 crore and those from investment exposures stood at Rs 190 crore. Corporate slippages stood at Rs 183 crore.

Management take:
“The last quarter was an extremely fulfilling one. Keeping the customer journey at the centre of all our innovations and solutions, we came up with some great initiatives to suit the current times. We have now gone to the next level of digital with video KYC and other tech-enabled solutions like the AXAA multilingual BOT. As we look forward to an upbeat festive season,” said Amitabh Chaudhry, MD & CEO, Axis Bank.

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