Axis Bank reported a 27 per cent increase in net profit at Rs 942 crore in the April-June 2011 quarter, against Rs 742 crore in the corresponding period last year. Robust growth in fee income, a moderate rise in net interest income coupled with lower provisions shored up the private sector bank's bottomline.
The rising interest rate environment resulted in the cost of funds going up to 6.13 per cent from 4.61 per cent in the year-ago period. This in turn pulled down the net interest margin to 3.28 per cent (3.71 per cent).
The reduction in NIM during the reporting quarter was driven by a slower build-up in current account and savings account deposits (CASA), leading to persistence of higher cost term deposits, and the upward revision in the rate of savings bank deposits.
“Cost of deposits for all banks has gone up by 250 basis points in the last one year. Hence, our net interest margin has contracted as expected. However, we will continue to maintain NIM in the 3.25-3.50 per cent range,” said Mr Somnath Sengupta, ED and CFO.
The bank's endeavour will be to maintain the CASA at around 40 per cent of the total deposits, he added.
While fee income rose by 42 per cent to Rs 1,057 crore (Rs 743 crore), net interest income saw a moderate increase of 14 per cent to Rs 1,724 crore (Rs 1,514 crore). Provisions and contingencies in the reporting quarter were lower at Rs 176 crore (Rs 333 crore).
Credit, deposits down
Sequentially (Q1 FY12 versus Q4 FY11), the bank's advances were down by 7 per cent to Rs 1,31,900 crore as of June-end 2011 (Rs 1,42,407 crore as of March-end 2011) and deposits declined by 3 per cent to Rs 1,83,597 crore (Rs 1,89,238 crore).
Mr Dasgupta attributed this de-growth to the typical phenomenon whereby banks contract short-term loans and deposits to build their balance-sheets in the run-up to the financial year-end and the unwinding of these loans and deposits in the first quarter. Though the bank received an in-principle approval from the RBI for acquiring certain de-merged businesses from Enam, Mr Dasgupta said, the central bank has stipulated certain conditions, including a revised scheme of accounting and the eventual structure for the businesses proposed to be acquired.
Mr Dasgupta said the bank is awaiting the central bank's final approval for the acquisition.
Axis Bank shares on Friday ended up 4.64 per cent at Rs 1296.95 a share on the BSE, compared to the previous close of Rs 1,239.40.