Axis Bank tops street estimates on net profit, business growth disappoints

  • Net interest income increases 21% year-on-year and 6% sequentially
  • Net interest margins hit a 20-quarter high of 3.6%, but lag peers
  • The bank’s asset quality also improved in the quarter, with a further increase in falling slippages

Axis Bank, the third-largest private sector bank, on Monday reported a net profit of ₹4,125 crore in the first quarter of FY23, a jump of 91% year on year, but remained flat sequentially. While the bank has beaten street estimates, its business growth momentum is lagging behind that of its peers.

The bank’s key financial metrics improved, with net interest income growing 21% year-on-year and 6% sequentially, net interest margins improving 14 basis points a year and down 11 basis points sequentially to 3.60% in the quarter. This bank’s margins hit a 20-quarter high.

Citi Fusion: “The customer experience should be hassle-free”

Speaking on the merger with Citibank, Amitabh ChaudhryCEO, Axis Bank said CCI approval should come in five to six weeks.

“Based on limited data, we have limited concerns about the companies, all of which are doing very well. We cannot engage with Citi until we get CCI approval. “Getting approval, we will be able to engage more actively. Merger date refers to the date we take over the assets. The customer experience should be hassle-free,” he said.

While NIMs continue to trend slightly lower than their larger counterparts, the lender showed improvement across all metrics in the quarter.

“You see the delivery on the NIM trajectory on what we said earlier. You can take higher risk and increase the NIMs, so our growth factors in the credit involvement on the book. An environment of rising interest rate is playing on the strength of the biggest bank and that should be positive for us on a net basis,” said Puneet SharmaCFO of Axis Bank.

Commission revenue also grew at a healthy 34% year-over-year, which is a major contributor to private lenders’ profits. Retail commission revenue grew 43% annually. The bank’s core operating income increased 17% year on year and 5% sequentially.

Loans to small businesses increased by 74%

After two years of the pandemic, lenders are pushing for growth and Axis Bank has reported lending growth across all segments, but disappointed analysts as it lagged peers. While retail lending grew 25% year-over-year and 3% sequentially, small business lending and rural lending grew 74% and 42%, respectively, from the same quarter last year . Overall loan growth is 14% per year.

The bank’s asset quality also showed improvement in the quarter, with a further accumulation of declining slippages as well as overall non-performing assets. Gross nonperforming assets were 2.76%, down 109 basis points year-over-year and 6 basis points sequentially.

The bank’s net nonperforming assets were 0.64%, down 56 basis points year-on-year and 9 basis points sequentially. The accumulation of new bad loans by the bank has also decreased. While the gross slippage ratio decreased by 210 basis points year-over-year and 33 basis points sequentially, the net slippage rate decreased by 0.41%, or 219 basis points per year. The bank’s provision coverage rate is 77%.

On an average quarterly basis, savings accounts grew 16% annually and 4% sequentially, while checking accounts grew 15% annually. Term deposits increased by 13% per year. On a quarterly basis, CASA was up 16% year over year and 1% sequentially. The bank’s CASA ratio is 43%.


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