Axis Bank Q3 Core Earning Grows – Bad Loan Problem Linger

Axis Bank Q3 core earning grows

Axis Bank – third largest private sector lender reported robust core income growth helped by its focus on retail banking space.

The lender exhibited that it is indeed growing into a strong retail bank, the strategy well paid off by returning into profit in the quarter ended December 2019.

However, the aggressive lending strategy does not work always and there is enough evidence of the stated strategy backfired.

Axis Bank has reported a 4.5% on-year gain in net profit at Rs 1,757 crore. Higher provisions and a high base in Q3FY19 due to recovery in the steel sector supported profitability.

The bank had reported a loss of Rs 112.08 crore in the previous quarter.

Net interest income (NII), the difference between interest earned and interest expended, grew by 15.16% on year to Rs 6,452.98 crore.

Loan growth was strong for the quarter at 5.5% sequentially and 16% (the highest since Q3FY18) YoY, indicating the bank has been gaining market share along with healthy NII.

The net interest margin at 3.57% was the highest in the last 10 quarters.

Axis Bank is likely to enhance its competitive position in the banking sector and in the worst case, a bad loan pool will rise by an additional 1-1.2%.

It has delivered a mixed revenue performance, while 5% on year earnings growth led by a lower tax rate.

The strong NII offset by a decelerating fee income growth, while slippages stubbornly high (4% of loans) this quarter. The provisions are likely to be high in the near term and could be a near-term risk.

Net Net we believe that higher slippages and provisions dented the Q3FY20 performance but longer-term the bank is well capitalized for stronger growth ahead in FY21 with both the retail and corporate loan book growth expected to get better with a better handle on asset quality ahead.

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.