A Rs 600-cr provision claw-back, lower NPAs help Axis Bank

Gains on the money set aside to fight asset quality issues helped private sector lender Axis Bank report a net income of Rs 1,505 crore for the three months to March against a net loss of Rs 2,188 crore in the year-ago quarter, helping it guide towards better days ahead. For the full fiscal 2019, the third largest private bank booked a net income of Rs 4,676 crore, up from Rs 275 crore in the heavy loan losses mired FY18, the city-based lender said Thursday.

A write-back of Rs 600 crore of provisions made for low-grade assets following the shift to the rules-based provisioning helped the bottom line. Another profit-booster was the improvement in dud loans, leading to a dive in provisions at a low Rs 2,711 crore from a high Rs 7,179 crore last year, the management explained. The bank also reported improvements on all key parameters on the asset quality front for the reporting quarter, indicating that the worst days are behind and guided towards better show ahead.

Over a three-year period, the bank is targeting to get down its credit cost to under 1 percentage point from a high of over 2 per cent in FY19. Advances to the lower rated corporates now constitute a mere 4 per cent of its corporate book from a peak of 11 per cent, and the bank is focusing more on working capital loans now, moving away from term-loans and has higher provisioning buffer to take care of any future difficulties, the management said.

Net slippages, after subtracting the upgrades, came in at a low Rs 630 crore, while the gross non-performing assets ratio improved 5.26 from 6.77, helping it to bring down the total provisions to less than a third of Rs 7,179 crore last year to Rs 2,711 crore now. Newly-inducted chief executive Amitabh Chaudhry told reporters that the bank has now adopted new rules-based provisioning which is a much conservative approach.

Chief financial officer Jairam Sridharan said the provision coverage ratio has gone up by 2 percentage points in a single quarter to 77 per cent, which excludes additional provisioning of Rs 1,300 crore which it has done on a conservative basis. Axis Bank has earmarked a few sectors that are under stress and set aside extra money to cover possible losses, while it also had to set aside more money for its land parcel holdings taken over through debt swap deals as per RBI orders.

Total exposure to the bankrupt IL&FS group stands at Rs 800 crore, of which Rs 300 crore have already become due, as per the income recognition and asset classification norms, Sridharan said, adding only Rs 14 crore is yet to be declared NPA as per the NCLAT order. It is holding provisions of Rs 50 crore for the loans. The core net interest income grew 21 per cent to Rs 5,706 crore on an 18 per cent loan growth and net interest margin remained stable at 3.44 per cent.

The other income grew to Rs 3,526 crore from Rs 2,788 crore in the year-ago period. In the new fiscal year, the bank is targeting to grow its book 5-7 percentage points faster than the system with an aim to gain market share and will be concentrating on the "challenge" of deposit mobilisation by focusing on the low- cost current and saving account advances, Chaudhry said.

He said the induction of Pralay Mondal from rival Yes Bank to head the retail business will aid this drive, and also added that all the top-level hires are done now. Head for the digital business has also been identified and will be joining in two months, he added. Chaudhry was hired from HDFC Life to replace Shikha Sharma, whose tenure was cut short by RBI, following the discovery of undisclosed NPAs by the regulator. No divergences have been found by the RBI for FY18, the bank said Thursday.

Its overall capital adequacy stood at 15.84 per cent with the core tier-I at 11.37 per cent and Chaudhry maintained the bank will not need any fresh capital till next January. Chaudhry did not comment when asked if the bank is under any discussions to continue its bancassurance partnership with Max Bupa Life.

The management was busy with the board meeting, he said, declining to comment on an adverse development at NCLT in the IL&FS account. The Axis Bank counter closed 1.56 per cent down at Rs 740.85 on the BSE, as against a 0.83 per cent correction in the benchmark.

(With inputs from agencies.)