Axis Bank continued to deliver a healthy 18 per cent growth in net profit for the third consecutive quarter. Considering credit growth slipped to five-year low levels, an 18 per cent growth in earnings in the first nine months of 2014-15, for a bank this size, is commendable.

Axis Bank’s strong retail push and stable asset quality continue to hold its performance in good stead.

While loan growth in the banking system as of December-end was a subdued 10 per cent, Axis Bank grew its loan book 23 per cent. As always, retail loans continued to witness good traction and grew at a robust 24 per cent.

Coroprate loans

But this time around, corporate loans too lent a helping hand.

Growth in corporate loans has been gaining momentum since the September quarter. This segment delivered a robust 25 per cent growth in the December quarter, up from 13 per cent seen last quarter.

Higher yield on loans and lower cost of funds have helped the bank improve its net interest margin (NIM) by 20 basis points over the past year.

Axis Bank has built a healthy retail deposit base by expanding its low-cost current account and savings bank (CASA) deposits as well as its retail term deposits.

CASA deposits grew by 12 per cent in the December quarter. Retail term deposits too sported a healthy 24 per cent growth.

The RBI’s latest cut in key policy repo rate will also help Axis Bank lower its cost of funds. Given a high ratio (43 per cent of deposits) of low-cost deposits, the bank will be able to adjust prices faster and maintain steady margins.

This will also provide enough headroom for the bank to lower its base rate — to which all lending rates are pegged.

Currently at 10.15 per cent, the base rate is a tad higher than that of HDFC Bank, ICICI Bank or SBI that have the lowest base rate at 10 per cent.

Apart from the healthy retail loan growth and stable margins, the bank’s steady asset quality during the quarter was another positive.

The gross non-performing assets (GNPA) remained at 1.34 per cent of loans, similar to that seen in the September quarter.

Axis Bank’s restructured loans stood at 2.37 per cent of loans, marginally lower than the 2.5 per cent level seen last quarter. However, the management has indicated a possible increase in restructured assets in the March quarter, given that the window for restructuring will close from April 2015.

Early bird

Axis Bank is the first of the larger private sector banks to announce third quarter results. In the first half of 2014-15, HDFC Bank delivered a 21 per cent growth in profit, while ICICI Bank clocked 16 per cent growth.

While both banks have been able to drive growth through strong retail focus and steady margins, ICICI Bank’s higher slippages in recent quarters have been a concern and will be keenly watched this quarter.

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