MUMBAI (Reuters) -India’s Axis Bank Ltd reported a smaller-than-expected 40.5% growth in first-quarter profit on Wednesday, as a sharp surge in loan-loss provisions outstripped a jump in net interest income.
The Mumbai-based private lender reported a net profit of 57.97 billion Indian rupees (nearly $707 million) for the quarter ended June 30, compared with analysts’ average estimates of 58.50 billion rupees, as per Refinitiv IBES.
Axis Bank had reported a one-time loss of 57.28 billion rupees for the January-March quarter, weighed down by costs incurred due to its $1.41 billion Citi deal.
Provisions and contingencies for Axis Bank, India’s fifth largest by market capitalisation, nearly tripled to 10.35 billion rupees.
This offset a 27.4% jump in its net interest income – the difference between interest earned and expended – to 119.59 billion rupees. Net interest margins too rose to 4.1% from 3.60% a year ago but shrank from 4.22% in the January-March quarter.
The higher provisions are on account of seasonality in the rural loan portfolio and the bank’s decision to raise the provision coverage on stressed loans, said Axis Bank’s chief financial officer Puneet Sharma during a call with the media.
The bank also continues to hold additional provisions made during the Covid crisis and will continue holding them as a matter of prudence, Sharma said.
Larger rivals HDFC Bank and ICICI Bank also reported double-digit net interest income growth for the fiscal first quarter.
Axis’ quarterly advances were up 22% year-on-year, in line with double-digit loan growth seen in Indian banks consistently over the last few months.
The bank’s loan growth has been broad-based across corporate and retail, with corporate loan growth being driven by demand for capital expenditure and working capital, the bank’s management said.
The Mumbai-based bank’s deposits grew 17%.
The bank’s gross bad loans as a percentage of total loans, a measure of asset quality, fell to 1.96% from 2.02% in the last quarter.
Its net non-performing assets ratio rose to 0.41% compared with 0.39% in the prior quarter.
The bank is not seeing any imminent signs of stress in its unsecured retail loan portfolio, Sharma added.
($1 = 81.9971 Indian rupees)
(Reporting by Siddhi Nayak and Sethuraman NR; Editing by Janane Venkatraman)
