Image: Danish Siddiqui / Reuters
Private sector lender Axis bank saw its net interest income grow by 1 percent to Rs 4,540 crore for the second quarter ended September 30, 2017. The net profit of the bank improved by 36 percent to Rs 432 crore for the same period. The overall balance sheet size of the bank was up 13 percent at Rs 6,35,316 crore. Retail loans of the bank saw a good growth of 23 percent and accounted for Rs 1,84,256 crore.
But the non-performing assets (NPA) of the bank increased to 5.90 percent from 5.03 percent, compared to the previous quarter ended June 30, 2017. Net NPAs went up to 3.12 percent as compared to 2.30 percent in the previous quarter. The gross slippages were seen at Rs 8,936 crore and write-offs were reported at Rs 2,517 crore.
In general, the result was lackluster. Fee income of the bank grew 12 percent to Rs 2,170 crore. The key driver of fee income growth was retail banking (growth of 23 percent) accounting for 48 percent of the total fee income of the bank. Cards fees grew 36 percent and Transaction Banking fees grew 13 percent. Trading profits for the quarter stood at Rs 377 crore.
Axis Bank is one of the few private sector banks that has underperformed the markets as compared to its peers. Over the last two years, the bank's market cap has moved up 5 percent compared to the S&P Banking index, Bankex, which is up by 35 percent. In the same period, Kotak Mahindra Bank is up by 65 percent.
In the previous quarter, Indian banks reported an earnings growth of around 22 percent due to flat loan-loss provisions. In general, revenue growth was led by non-interest income, a situation which is likely to continue even in the quarter ended September 30, 2017. A research report by Kotak Institutional Equities said that the first quarter results were affected by NIM contraction due to shift to marginal cost of funds-based lending rates (MCLR), high non-performing loans (NPLs), abundant liquidity and low growth. Not much is likely to change in the current quarter.
According to the aforementioned report, "Impaired loans of public banks increased around 80bps to 14.1% (gross NPLs increased 90 bps qoq to 11.3%) while that of private banks declined 10bps to 5.3% of loans. Increase in gross NPLs on an absolute basis is quite low and stable at ~5% qoq. Fresh slippages were elevated at 5.7% of loans with contribution coming from a few known corporate sectors (electronics and engineering) as well as higher slippages post debt-waiver and demonetisation. The present quarter will face similar issues."