Axis Bank: Q1 net profit falls, asset quality improves

Axis Bank shares surged more than 8% in early trade Wednesday, a day after the country’s fourth largest private sector lender by market value reported its earnings for the April-June period. The Axis Bank stock touched the Rs 482.85 apiece mark on the BSE, marking a gain of 8.21% over its previous close of Rs 446.20. Axis Bank shares were the top percentage gainers on both benchmark indices – S&P BSE Sensex and NSE Nifty 50 – in morning deals.
The private sector lender net profit stood at Rs 1,112.17 crore in the quarter ended June 30, Rs 1,626 crore when adjusted for accounting policy changes and net interest income reserves.

Axis Bank’s unadjusted net profit declined 18.82% compared to the corresponding period a year ago. Net interest income (NII) – or the difference between interest earned and interest expended 19.54% to Rs 6,985.31 crore.
Its total interest income rose 8.42% to Rs 16,538.89 crore.
Axis Bank’s asset quality improved in the April-June period, with gross non-performing assets – or bad loans – as a percentage of total loans at 4.72%. Gross NPAs had stood at 4.86% in the January-March period, and 5.25% in the quarter ended June 30, 2019.

The private sector lender had 9.7% of its loans under moratorium at the end of the April-June quarter.
These numbers point to a trend–larger private banks have clearly taken a more cautious approach in extending the second round of loan relief to customers.

The fall in moratorium book could be due to two reasons. One, banks are not extending the moratorium to all customers. Two, a lesser number of customers approached their banks for EMI deferrals in the second round.
An extra cautious approach is visible against coronavirus uncertainties in the future. This is reflected in a substantial increase in additional provisions. Provisioning is the money set aside by banks under the Reserve Bank of India (RBI) norms to cover likely losses in problematic loan accounts.

Additional provisions held by Axis Bank now stand at Rs 6,898 crore, which is well above RBI’s norms.
The additional provisions were over and above the NPA provisioning included in PCR (provision coverage ratio) calculations and the 0.4% standard asset provisioning requirement.

COVID-19 has affected the world economy including India, causing volatility in financial markets and hampering economic activities. The pandemic will impact Axis Banks operations and asset quality will depend on future developments, “which are highly uncertain

Disclaimer –
This document is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. Also above note is not a recommendation to Buy or SELL and is only a view based on facts and figures and we will be in no way responsible for any losses incurred by anyone who uses this information to either trade or invests securities mentioned herein.