Axis Bank Q2 PAT jumps 70 per cent on strong NII growth, margin expansion

Axis Bank posted a 70 per cent YoY jump in its net profit for Q2FY23 to ₹5,330 crore, also higher by 29 per cent sequentially, which the bank attributed to strong NII growth, NIM expansion, increase in fees income and contained operating expenses.

The private sector lender reported strong loan growth across focused business segments, with domestic advances growing 20 per cent YoY and 4 per cent on quarter. This was led by a 22 per cent growth in retail loans, 69 per cent in small business banking, 46 per cent in rural loans and 28 per cent in SME loans.

Domestic corporate loans grew 9 per cent on year, but the mid-corporate segment showed a strong growth of 49 per cent on year. Net advances, including global loans, were up 18 per cent to ₹7.3 lakh crore.

In the earnings call, CFO Puneet Sharma said that the pricing environment for corporate loans has improved but that the bank continues to be selective and cautious, adding the focus areas for the bank will continue to SME and mid corporates.

He added that retail loan growth continues to be strong, as reflected in the increasing credit card spends and that so far there has been no negative impact of the increase in rates.

Net interest income (NII) grew 31 per cent YOY and 10 per cent QOQ to ₹10,360 crore. Net interest margin (NIM) for Q2FY23 stood at 4 per cent, 57 bps higher on year and 36 bps on quarter. The bank also saw a trading loss of ₹86 crore during the quarter, as against gains of ₹473 crore in the year ago period.

‘Maintaining margin is key’

MD and CEO Amitabh Chaudhry said that because the bank has achieved the target of over 3.8 per cent NIM faster-than-expected, it now has a cushion to manage margins, create a sustainable enterprise and start looking for growth opportunities.

With more upward repricing of deposits expected in the coming months, the goal of the bank would be to maintain margins in the same range, he added.

Gross NPA ratio of the bank declined by 103 bps YoY and 26 bps QoQ to 2.5 per cent as of September 30. The net NPA ratio too was better at 0.5 per cent, lower by 57 bps YoY and 13 bps QoQ.

Total deposits of the bank grew 10 per cent YoY to ₹8.1 lakh crore, of which low-cost CASA deposits accounted for 46 per cent at the end of September.

Overall capital adequacy ratio, including profit for H1FY23, was at 17.7 per cent as of September 30, of which CET-1 capital was 15.1 per cent, with the bank saying that Covid provisions of ₹5,012 crore, also provide additional cushion of 55 bps.

Chaudhry said that the bank is accruing sufficient profits to sustain loan growth and is not looking to raise capital at least till the acquisition of Citibank’s consumer business is completed--expected to be by Q1FY24 at most.

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