Axis Bank delivers steady growth

Axis Bank, much like its peer HDFC Bank, continued to report a steady growth in earnings for the recent June quarter. No nasty surprises on the asset quality front is a key positive at a time when smaller private banks such as Federal Bank and South Indian Bank have seen a substantial increase in bad loans.

In any case, maintaining a healthy loan growth and keeping bad loans under check has not been a concern for Axis Bank.

After delivering a strong 18 per cent earnings growth last fiscal, the bank has started the current year on a strong note, with a jump of 19 per cent in profit in the June quarter, backed by a strong growth of 26 per cent in retail loans. This, and the growth of 23 per cent in total loans, compares favourably with HDFC Bank, which also reported a 22 per cent loan growth.

Corporate loans have been gaining momentum too, in the past few quarters. This segment delivered 27 per cent growth as of June 2015 over the year ago.

However, Axis Bank which sports a healthy retail deposit base saw its low-cost current account and savings bank (CASA) deposits ratio slip by 2 percentage points sequentially to 43 per cent during the June quarter. This was led by a 16 per cent fall in current account deposits. The trend is similar to that seen in HDFC Bank, where a 9 per cent fall in current account deposits and jump in term deposits, saw CASA ratio fall by a little over four percentage points during the quarter.

Axis Bank’s net interest margin has held steady at 3.8 per cent during the June quarter, despite a 20 basis points fall in base rate (against which lending rates are pegged) during the quarter. The bank has further lowered its base rate by 10 basis points effective June 30. But Axis Bank is well placed to lower its cost of funds, given its healthy share of low cost deposits, despite the June quarter's decline. The bank will be able to adjust prices faster, as interest rates move south and maintain steady margins.

Axis Bank's gross non performing assets (GNPA) marginally increased to 1.38 per cent as of June 2015, from 1.34 per cent previous quarter. Its restructured loans went up to 2.8 per cent of loans from 2.7 per cent in the March quarter. Further slippages from restructured to non performing category as well as addition to restructured assets will need watching.