Axis Bank: Retail focus pays dividends

De-risking its business model, Axis Bank’s renewed focus on the retail segment over the last two years has worked to its advantage.

The bank held up its performance on all key parameters in the March quarter. Net profit grew 22 per cent in comparison to the previous year. This was despite an additional Rs 240 crore provisioning for contingencies.

The net interest income grew 24 per cent backed by loan growth of 16 per cent and increase in net interest margins by 13 basis points to 3.7 per cent in the March quarter.

The bank has consistently delivered better growth than the industry, and the momentum continues. The loan growth during the quarter was driven by a 44 per cent jump in the retail loan book which now contributes 27 per cent of the overall loans.

The company is well on track to increasing its contribution from retail loans to the targeted 30 per cent by end- FY15.

Slowdown in the large- and mid-corporate segments continued to impact loan growth, which rose 7.9 per cent during the March quarter. However, SME (small and medium enterprise) loans maintained its momentum, growing 26 per cent. The company remains focussed on top-rated SMEs.

The thrust on retail business has also led to a stable fee income, contributing one-third of the total fee income. In the March quarter, the 22 per cent rise in fee income was led by a 32 per cent growth in the retail fee income.

low-cost deposits

Axis Bank continued to focus on low-cost current and savings deposits. Savings deposits, which have grown at a faster pace than that of the industry, maintained a strong 23 per cent growth during the March quarter. The CASA (current account savings account) deposits grew 23 per cent over the previous year.

Also, the bank continues to focus on increasing the share of retail term deposits. During the March quarter, these deposits grew 24 per cent, lending stability to the bank’s liquidity.

CASA and retail term deposits together contributed 68 per cent of the overall deposits as of March quarter.

Steady Asset quality

Axis Bank also held up on asset quality, with gross non-performing assets at 1.06 per cent and net non-performing assets at 0.32 per cent of loans in the March quarter. Restructured assets stood at Rs 4,368 crore, which is 2.2 per cent of the loans. While restructuring remains the highest among private sector peers, additional slippages and restructuring every quarter have been in line with the management’s guidance.

> radhika.merwin@thehindu.co.in

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