Axis Bank posts 5% rise in Q3 consolidated net profit; flags concerns on deposit growth

Mumbai: Axis Bank on Tuesday reported a 4.91 per cent growth in its consolidated net profit to Rs6,491.66 crore, dragged down by higher operating expenses. On a standalone basis, the third largest private sector lender's net profit for the October-December period grew less than 4 per cent at Rs6,071 crore. Its core net interest income grew 9 per cent to Rs18,087 crore, while non-interest income was up 22 per cent to Rs5,555 crore. The total assets grew 14 per cent, while the net interest margin narrowed to 4.01 per cent from 4.26 per cent in the year-ago period, and 4.11 per cent in the preceding quarter.

Puneet Sharma Chief Financial Officer of the bank said Axis bank aspires to maintain the cushion it has generated on the Net Interest Margin (NIM) front, where they aspire for the number to be above 3.8 per cent from a structural perspective. The overall operating expenses grew 32 per cent to Rs8,946 crore during the quarter, driven largely by non-staff spends, and the bank management said these are investments being done for the future. The bank's credit-to-deposit ratio went up to a high 92 per cent during the quarter, despite an overall deposit growth of 18 per cent, and Sharma clarified that the Reserve Bank of India (RBI) has not prescribed any level for the ratio.

He said in the future, the bank fears that the deposit growth will put a "constraint" on the loan growth, but added that he is confident of the loan growth and deposit growth numbers converging. It is a "war for deposits", a bank executive told reporters. The cost of deposits will continue to grow, he said, adding that there will be a spill-over of the hikes into the first quarter of the next fiscal. In the reporting quarter, the bank seems to have had to resort to booking bulk deposits, as the non-retail term deposits were up 12 per cent quarter-on-quarter. The bank has a Rs207 crore investments in Alternative Investment Funds (AIFs) and had to take a 100 per cent provision on it as per the RBI mandate, Sharma said.

The overall provisions stood at Rs1,028.34 crore as against Rs1,437.73 crore in the year-ago period. On the asset quality front, the gross slippages ratio inched up to 1.62 per cent on an annualised basis, which was blamed on seasonal stress coming from rural and agri advances. The gross non-performing assets ratio stood at 1.58 per cent as on December 31 as against 1.73 per cent in the quarter-ago period. The bank had to take a 0.70 per cent hit on the capital buffers because of the changes in risk weights on unsecured loans and non-bank lenders, Sharma said, adding that its overall position is strong at 14.88 per cent and it does not have any fund raising plans. For the subsidiaries, the bank said the overall profit after tax grew 17 per cent at Rs1,1,08 crore. The Axis Bank scrip closed 2.84 per cent down at Rs1,088.90 apiece on the BSE on Tuesday.