Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Companies / Axis Bank profit rises 18% as provisions decline
BackBack

Axis Bank profit rises 18% as provisions decline

Net profit increases to Rs1,667 crore; bank substantially reduces provisions on bad loans by 46% to Rs387 crore

Net interest income, or the money the bank earns from giving loans, increased 15% to `3,310 crore. Photo: Abhijit Bhatlekar/MintPremium
Net interest income, or the money the bank earns from giving loans, increased 15% to `3,310 crore. Photo: Abhijit Bhatlekar/Mint

Mumbai: Axis Bank Ltd’s fiscal first-quarter profit rose 18%, as the lender set aside less money to cover bad loans.

Net profit rose to 1,667 crore in the three months ended 30 June from 1,409 crore in the year earlier, Axis Bank said on Tuesday. That compares with the 1,690 crore first quarter profit estimated by a Bloomberg survey of 34 analysts.

Net interest income, or the money the bank earns from giving loans, increased 15.5% to 3,310 crore up from 2,865 crore last year, but it rose at the slowest pace since June 2011, a Mint analysis shows.

Somnath Sengupta, executive director and head of the corporate centre at Axis Bank, said that while there was hope that the Indian economy will revive, it is likely that the revival will happen only by the end of the financial year.

Net non-performing assets (NPAs) as a percentage of net advances increased to 0.44% in the June quarter from 0.4% at the end of the March and 0.35% in June 2013. Loans worth 626 crore slipped into NPAs during the quarter and the bank also restructured loans worth 480 crore.

The bank, however, substantially reduced provisions on bad loans by 46% to 387 crore in the quarter ended June from 712 crore in the year earlier. The reduction in provision directly contributed to the bank’s profit.

Sengupta explained that the provisions dropped because the bank benefited from a 15 crore write-back.

Last year, the bank had marked 120 crore as provisions for depreciation and investments. Such provisions were not needed this year.

Income earned through fees and commissions dropped 5% to 1,691 crore from 1,781 crore because fees from companies for loan processing and debt syndication slowed.

Manish Ostwal, an analyst at Kisan Ratilal Choksey Shares and Securities Pvt. Ltd, said the core performance of the bank was positive though the drop in other income was “marginally negative".

“The cost-to-income ratio also has increased to 42% from 39% in March and provisions have dropped because floating provisions which were there last quarter are not there now, but the bank had maintained margins and has ensured that the stress on its books has not increased much," Ostwal said.

Net interest margin (NIM), or the difference between interest earned on loans and that paid for deposits, remained stable at 3.88% versus 3.86% last year.

“We expect NIM to be above 3.5% for the rest of the year. The revival in the corporate loan demand will depend on how the economy recovers," Sengupta said.

Demand for loans from companies increased just 2% from a year earlier but a 22% rise in loans from small and medium enterprises (SMEs) and 35% growth in retail loans helped the bank.

From this quarter, Axis Bank has merged its agriculture book into retail loans and loans to SMEs “to focus on the rural market in its whole entirety so as to leverage both the agriculture and consumer lending in rural areas", said Jairam Sridharan, head of consumer banking and payments at Axis Bank.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
More Less
Published: 22 Jul 2014, 04:53 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App