Axis Bank posted a 62 per cent year-on-year (y-o-y) increase in net profit for Q3 FY23 to ₹5,853 crore, led by healthy loan growth and improvement in the bank’s asset quality. Sequentially, the profit after tax was 10 per cent higher.

Net advances of the private sector lender grew 15 per cent y-o-y and 4 per cent quarter-on-quarter to ₹7.6-lakh crore at the end of December, on the back of 17 per cent y-o-y and 5 per cent q-o-q growth in domestic net loans. The growth was led by 39 per cent growth in credit card advances, 21 per cent in personal loans, 60 per cent in small business banking, 27 per cent in rural loans and 42 per cent in mid-corporate loans.

In the post-earnings call, MD and CEO Amitabh Chaudhry said that the bank is seeing broad-based growth across renewables, roads, chemicals, urban energy distribution, commercial real estate, healthcare and capacity expansion projects especially in consumption. He added that pricing on corporate loans has improved compared to 2-3 quarter back.

Net interest income (NII) for the bank rose by 32 per cent y-o-y and 11 per cent q-o-q to ₹11,459 crore. NIM for the quarter was at 4.26 per cent, 73 bps higher on year and 30 bps higher on quarter.

Asked on the slower growth in the retail book compared with corporate loan book, group executive and head of retail lending, Sumit Bali, said there was some weakness in mortgage loans where closure of loan inquiries is taking longer than expected. However, there has been an improvement Jan onwards and growth should be back to normal in the ongoing quarter.

“Structurally the balance sheet is where it needs to be,” said Bali, adding that the bank’s focus is now on delivering 18 per cent RoE, regardless of whether that comes from retail or corporate loans. Within the corporate segment, the bank will continue to focus on its chosen segments such as mid-corporate, MNCs and SME, he said.

CFO Puneet Sharma said that in the medium term, Axis Bank’s loan book will continue to grow 500-600 bps faster than industry, whereas for FY23 he expects credit growth to be at par with or higher than the industry.

Provisions, asset quality

Axis Bank made one-time prudent provisions of ₹340 crore, taking total provisions during the quarter to ₹1,438 crore.

Sharma said that the one-time provisions were made against “large named accounts” that the bank chose to downgrade to NPA as a qualitative risk call. Owing to this, gross slippages for the quarter were higher by ₹410 crore.

“This adversely impacted reported gross slippages by 22 bps, reported net slippages by 22 bps, reported GNPA% by 5 bps, reported NNPA% by 1 bps,” the bank said.

Also read: IDBI Bank’s Q3 profit surges 60% to ₹927 crore

Gross slippages for the quarter were ₹3,807 crores, off-set in part by recoveries and upgrades of ₹2,088 crore. The bank also saw recoveries of Rs 608 crore from written off accounts, and wrote-off loans worth ₹1,652 crore during the quarter.

Gross NPA ratio of the bank improved to 2.38 per cent as of December 31, compared with 2.50 per cent in the previous quarter and 3.17 per cent in the previous year. Net NPA ratio at 0.47 per cent was also better than 0.51 per cent a quarter ago and 0.91 per cent a year ago.

Axis Bank’s deposits grew 10 per cent YoY and 5 per cent QoQ to ₹8.5 lakh crore, with Sharma saying that liability repricing is likely to come into play from the current quarter and going into Q1 FY24.