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Axis Bank Q2 profit jumps 86% to Rs 3,133 crore on significant fall in provisions –

Axis Bank

Private sector lender Axis Bank on October 26 reported a healthy 86.2 percent year-on-year (YoY) growth in standalone profit at Rs 3,133.32 crore for the quarter ended September 2021 (Q2FY22) as there was a significant fall in provisions.

Profit in the year-ago quarter stood at Rs 1,682.67 crore.

Net interest income (NII), the difference between interest earned and interest expended, grew by 7.8 percent to Rs 7,900 crore compared to the corresponding period last fiscal, with 10 percent growth in loan book driven by focused business segments. Net interest margin contracted to 3.39 percent in the quarter, compared to 3.46 percent in June quarter and 3.58 percent in September 2020 quarter, while cost of funds declined declined further to 3.87 percent from 3.97 percent in Q1FY22 and 4.60 percent in Q2FY21.

“Retail loans, where 80 percent of the book is secured, grew 16 percent YoY, while there was 18 percent YoY growth in SME loans, and 32 percent rise in mid-corporate loan book during the September 2021 quarter,” said the bank in its BSE filing, adding 93 percent of incremental sanctions in corporate were to those rated A- and above.

The bank, which had a network of 4,679 domestic branches & 10,970 ATMs, said its balance sheet grew 17 percent YoY and stood at Rs 10.5 lakh crore as of September 2021. “The total deposits grew by 18 percent YoY, both on period end basis and quarterly average balance (QAB) basis.”

Asset quality has seen good improvement on sequential basis with increase in recoveries and upgrades. Gross non-performing assets as a percentage of gross advances fell 22 bps sequentially to 3.53 percent in Q2FY22, and net NPAs declined 12 bps QoQ to 1.08 percent.

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Gross slippages during the quarter declined to Rs 5,464 crore, compared to Rs 6,518 crore during Q1FY22, said the bank, adding recoveries and upgrades from NPAs during the quarter were Rs 4,757 crore and write-offs were Rs 2,508 crore against Rs 2,543 crore and Rs 3,341 crore respectively in Q1FY22.

Axis Bank said the fund based outstanding of standard restructured loans implemented under resolution framework for Covid-19 related stress (Covid 1.0 and Covid 2.0) as at September 2021 stood at Rs 4,342 crore that translates to 0.64 percent of the gross customer assets. “The bank carried a provision of around 24 percent on restructured loans, which is in excess of regulatory limits.”

Provision coverage ratio as a proportion of gross NPAs during the quarter remained steady at 70 percent on sequential basis. Provisions prior to technical write-offs remained stable at 88 percent, said the bank.

Provisions and contingencies fell sharply by 47.5 percent sequentially to Rs 1,735.09 crore in Q2FY22 and the year-on-year decline was 60 percent. Specific loan loss provisions for Q2FY22 were Rs 927 crore compared to Rs 2,865 crore in Q1FY22.

The bank said it had not utilized Covid provisions during the quarter. The bank held cumulative provisions (standard + additional other than NPA) of Rs 12,951 crore at the end of Q2FY22.

Non-interest income (other income) grew by 6.4 percent year-on-year to Rs 3,798.38 crore in the quarter ended September 2021 as fee income, which accounted for 85 percent of other income, grew 17 percent YoY to Rs 3,231 crore.

“Retail fees grew 19 percent YoY which constituted 63 percent of the bank’s total fee income. The corporate & commercial banking fee grew 15 percent YoY. The trading profits and miscellaneous income for the quarter stood at Rs 473 crore and Rs 95 crore respectively,” said the bank.

Pre-provision operating profit fell 11 percent to Rs 5,928 crore during the quarter YoY.