The performance of leading private banks in the recent quarters has not seen any notable deviation from their past record.
This appears to be the case in the September quarter too, if one were to go by the results declared by Axis Bank and HDFC Bank so far. Axis Bank, much like its peer, HDFC Bank, that declared its results earlier, continued to report steady growth in earnings for the reporting quarter.
Healthy traction in loans, stable margins and absence of nasty surprises on the asset quality front are key positives.
For eight quarters now, Axis Bank has maintained a run rate of 18-19 per cent growth in net profit. In the September quarter too, the private lender delivered a 19 per cent growth in earnings, backed by 23 per cent growth in loan book.
HDFC Bank witnessed a substantial pick-up in overall loan growth at 28 per cent in the September quarter, aided by a sharp base rate cut ahead of its peers in the beginning of September.
Nevertheless, Axis Bank’s performance compares favourably with the growth seen in HDFC Bank. Axis Bank has also reduced its base rate recently, which is likely to aid growth.
Axis Bank’s net interest margin has held steady at 3.85 per cent during the September quarter.
The bank has reduced its base rate by 35 basis points from October. But given its healthy share of low-cost deposits (CASA at 44 per cent), it will benefit from lower cost of funds and will be able to maintain steady margins.
Retail loans continue to be on a strong footing, growing 27 per cent over the previous year.
Along with good traction in retail loans, corporate loans too, have been gaining momentum in the past few quarters. This segment delivered 24.6 per cent growth as of September 2015.
Aside from a consistent growth in loans that has been higher than the industry growth rate, Axis Bank’s stable asset quality is yet another key positive. While in absolute terms the gross non-performing assets (GNPA) increased by 4.7 per cent sequentially, it continued to remain stable in percentage terms at 1.38 per cent of loans as of September 2015.
Restructured loans Its restructured loans stood at 2.65 per cent of loans, marginally lower than 2.8 per cent recorded in the June quarter. But given Axis Bank’s higher exposure (vis-à-vis private banks) to stressed sectors, such as power and infrastructure, further slippages and addition to restructured assets will need watching.