Axis Bank net soars 95%, but says not out of NPA woods yet

The third largest private sector lender Axis Bank Tuesday reported a full 74 percent surge in consolidated net income at Rs 1,261 crore on low base effect, but warned that it is not yet out of the woods when it comes to containing dud assets accretion. The city-based lender's net profit on a standalone basis surged 95 percent to Rs 1,370 crore.

Profit would have been much higher had it not been for an additional Rs 2,358 crore in provisions, including Rs 994 crore for the quarter, to take care of future NPA shocks and the management also made it clear that it will be cautious going forward. "Domestic growth conditions remain softretailers, auto sales are weak and demand for capital goods remains flat," managing director and chief executive Amitabh Chaudhry told reporters.

He said the bank does not want to only grow but be sustainable as well, due to which it will be "cautious" given the operating environment. But he was quick to add that there are many opportunities to grow even in this market which it will be chasing. The additional provisioning includes Rs 459 crore set aside towards non-fund-based exposures of Rs 2,500 crore, and Chaudhry said the bank has looked at its historic NPAs and the composition book rated BB and below to come at a ratio of provisioning required.

The overall BB and below book stood at Rs 7,500 crore, chief financial officer Jairam Sridharan said, adding the book got swelled by over Rs 2,200 crore during the quarter, while Rs 1,000 crore each slipped into NPAs but was repaid during the quarter itself. He said the additions to the low-rated book is coming from a specific book and is not sectoral.

Overall slippages came in at Rs 2,600 crore, with half of them coming in from corporate advances, Rs 450 crore from small businesses and Rs 880 crore from retail. The gross non-performing assets ratio improved to 5.25 percent from 6.52 percent a year ago, while total provisions stood at Rs 3,814 crore as against Rs 3,337 crore.

The core net interest income grew 13 percent to Rs 5,844 crore, as global net interest margin compressed to 3.40 percent and a 19 percent loan growth. Other income grew 32 percent to Rs 3,868 crore, and an ability to limit operating expenses to 3 percent was one of the key factors which helped the growth, Sridharan said.

Retail advances grew 22 percent while corporate book grew 16 percent. Retail NPAs are stable, including the agricultural NPAs where its larger rivals have witnessed some issues, Chaudhry said. The capital adequacy ratio stood at 16.06 percent with the core tier-I at 12.90 percent. The bank management declined to give a timeline on the capital raising plan, for which it is seeking a shareholder approval.

The bank scrip closed 1.82 percent down at Rs 706.55 on the BSE, as against a 0.77 percent correction on the benchmark..