Higher margins and non-core income lift Axis Bank Q4 profit

Mumbai: Axis Bank, India's fourth-largest private lender by market capitalisation, has reported a robust profit of ₹7,129.67 crore for the March quarter, supported by margin expansion and higher non-core incomes. The bank expects deposit growth to be a constraint in the short term.

The bank had reported a loss of ₹5,728 crore in the corresponding period a year ago on goodwill impairment following Citibank's portfolio acquisition. The bank had reported a net profit of ₹6,071 crore in October-December 2023 period, translating into a 17% increase in profit on a sequential basis.

Net interest margin (NIM) improved by 5 basis points quarter on quarter to 4.06% due to better spreads and improvement in asset quality. The NIM during the December quarter stood at 4.01%.

By contrast, India's most valued lender HDFC Bank last week reported an NIM of 3.44%, with a mild improvement in comparison with the January quarter.

"We continue to state that based on whatever we are hearing and seeing in the marketplace, the deposit growth will remain a constraint, liquidity will remain tight," said Amitabh Chaudhry, MD & CEO of Axis Bank.

The board declared a dividend of ₹1 per equity share of face value of ₹2 per equity share for FY24.

The bank saw total deposits grow by 13% on year on year (YOY) and 6% quarter on quarter (QoQ) on period end basis, of which savings account deposits grew 2% YoY and 4% QoQ. The share of CASA deposits in total deposits stood at 43% in FY24 from 47% in FY23.

Net interest income, difference between interest earned and expended, grew 11% year-on-year and 4% QoQ to ₹13,089 crore.

The growth in interest income was aided by a 23% year-on-year increase in fee income, with retail fees climbing 33%.

The bank's gross non-performing asset (NPA) declined to 1.43% while net NPA ratio fell 0.31%, from 1.58% and 0.36% as of December 31, 2023. Recoveries from written off accounts for the quarter was ₹919 crores. Gross slippages during the quarter were ₹3,471 crore lower compared to ₹3,715 crore in Q3FY24. Provision and contingencies for the quarter was ₹1,185 crore with specific loan loss provisions at ₹832 crore.

The bank's advances grew 14% YoY and 4% QoQ to ₹9,65,068 crore as on March 31, 2024. The bank is seeing corporate loan demand to be fairly broad-based across various sectors.

“The pipeline for incremental demand on the corporate side continues to be quite strong,” the management said. However, due to the current interest rate curve, the bank may not engage in transactions, where customers can obtain better yields from the bond market than from loans.

“At this point in time, given the way that the curve is shaped, where short-term rates are like a one-year deposit rate is closer to 7.5%, but the 10-year G-sec is closer to 7.20%, the shape of the curve will preclude us from participating in any of the transactions where potentially the customer is able to get better yields from, for example, the bond market as opposed to the loan markets,” the bank explained.

The capital adequacy ratio remained robust at 16.63%, with a CET-1 ratio of 13.74%. Today, the bank's board has approved raising funds through debt instruments in Indian and foreign currencies, aiming to raise up to 35,000 crore. Also, an additional 20,000 crore raise through equity shares, depository receipts, or other instruments linked to equity shares has been approved. The bank said that these are enabling provisions for the financial year.

Shares of the bank rose 0.69% to 1,063 on BSE when the Sensex rose 1.16% on Wednesday.