The Hindu Business Line : AXIS Bank rides on core business growth

Mumbai, Oct. 15 Buoyed by a higher net interest income resulting from the growth in advances and investments, AXIS Bank has recorded a 60.46 per cent growth in its net profit for the quarter ended September 30, 2007.

The net profit rose to Rs 227.82 crore, against Rs 141.98 crore in the corresponding quarter of the previous fiscal. “We have done away with the expensive term deposits due to the surplus liquidity in the system, which has contributed positively to the high net interest income, ” said Dr P. J. Nayak, Chairman, AXIS Bank.

The bank’s net interest income rose 72.88 per cent at Rs 588.67 crore (Rs 340.51 crore). The net interest margin increased to 3.28 per cent (2.92 per cent).

“The net profit grew on the back of margin expansion (which was partly supported by capital raising), more than 50 per cent advances growth, robust fee income and unexpectedly high trading gains,” said Mr Vishal Goyal, an analyst with Edelweiss Capital Ltd.

The capital adequacy ratio is at 17.59 per cent (11.52 per cent). The bank has raised about Rs 872.24 crore by way of GDR offering, Rs 1,752 crore through QIP and Rs 1,903 crore through a preferential allotment to promoters in the quarter under consideration.

Fee-based income

The fee-based income grew by 69 per cent to Rs 288 crore (Rs 170.38 crore). The bank’s success in placement and syndication of corporate bonds is reflected in the rise in fee-based income, said Dr Nayak.

The cost of funds increased 76 basis points to 6.18 per cent (5.42 per cent).

The share of low cost deposits (Savings Bank and Current Accounts) rose to 45 per cent of the total deposits, against 40 per cent last year. “The low cost CASA deposits which used to be in the range of 40-42 per cent have seen a new high. It will be a challenge for us to maintain it at these levels,” said Dr Nayak.

The net advances grew by 53.5 per cent to Rs 44,701 crore, with agricultural advances growing by 83.67 per cent to Rs 3,365 crore, and advances to large and mid corporate growing by 66.29 per cent to Rs 22,687 crore.

The bank plans to have wholly owned subsidiaries for its mutual fund and trusteeship business. The bank was already into trusteeship business, but now wants a separate subsidiary to increase focus. Talking about the investment need for the subsidiaries Dr Nayak said, “Our capital adequacy is high and we can meet the investment required for these subsidiaries.”