Axis Bank reported a net loss of ₹5,728 crore for Q4 FY23 owing to a one-time exceptional item of ₹12,490 crore for the integration of Citibank India’s consumer banking business.

The exceptional item, comprising the amortisation of Intangibles and Goodwill equal to the purchase value paid, was charged to the profit & loss account.

It included a one-time stamp duty on the acquisition and the impact of policy harmonisation on operating expenses and provisions as Axis Bank’s provisioning policies are more conservative than Citibank’s.

Excluding this expense, profit after tax was ₹6,625 crore, up 61 per cent y-o-y and 13 per cent q-o-q. For FY23, the net profit was ₹21,933 crore, 68 per cent higher.

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Axis Bank reports unexpected one-time loss in Q4

Margin expansion

Net Interest Income (NII) for the quarter was up 33 per cent y-o-y and 2 per cent q-o-q to ₹11,742 crore. Net Interest Margin (NIM) was 4.22 per cent, up 73 bps y-o-y, excluding the Citi book. For FY23, NII was up 30 per cent at ₹42,946 crore and NIM was up 55 bps at 4.02 per cent.

In the post-earnings call, CFO Puneet Sharma said in addition to asset pricing due to rate transmission, margin improvement was led by pricing discipline, asset mix change, reduction in RIDF, and improved quality of deposits.

“Even as deposit rates are expected to go up, the bank has a sufficient cushion on margins and the ability to deliver consistent RoE,” he said.

Currently, 41 per cent of the portfolio is repo linked and overall 68 per cent of loans are floating rate.

Axis Bank’s advances grew 19 per cent y-o-y and 11 per cent q-o-q to ₹8.5-lakh crore as of March 31, led by 23 per cent y-o-y and 13 per cent q-o-q growth in domestic advances. Retail loans accounted for 58 per cent of net advances. Of the retail loans, 78 per cent of loans were secured and 32 per cent were home loans.

Unsecured personal loans grew 21 per cent y-o-y and 8 per cent q-o-q, and credit card advances grew 97 per cent y-o-y, including cards acquired from Citi. Axis Bank disbursed a record 11.3 lakh credit cards in Q4, with spends up 57 per cent giving the bank a market share of 10 per cent.

“Unsecured loans have remained at 20-24 per cent of disbursements over the last four quarters, and the bank does not see much risk there in terms of portfolio quality,” Sharma said.

Group Executive Arjun Chowdhry said that there is good early traction in customer acquisition in cards as Citi customers are “taking well to Axis products”, corporate salary customer account volumes are picking up, and there is a benefit of geographical expansion and a larger product suite.

The objective will remain to grow the cards portfolio and also spends led by the acquisition of a premium customer segment.

Corporate credit

Domestic corporate loans grew 24 per cent y-o-y and 11 per cent, with Sharma saying corporate credit demand is strong and broad-based, both for term loans and working capital and also some private capex across sectors.

“Iron and steel, for example, there are large corporates venturing into new businesses, a lot of corporate activity is happening and we are participating in that. Over the next 6-12 months, the pipeline is robust and we expect to see this momentum flowing into the current year as well,” he said, adding that the bank is not worried about the credit environment and pricing remains conducive to support credit growth.

“Fresh private capex cycle has started,” he said, adding that capacity utilisation is over 75 per cent and private capex will continue to grow in FY24.

Retail slippages at ₹807 crore comprised 80 per cent of gross slippages of ₹3,375 crore for the quarter. However, adjusted for recoveries from written-off accounts, net slippages were a negative ₹147 crore. Recoveries and upgrades were ₹2,699 crore and the bank wrote off NPAs worth ₹2,429 crore.

The gross NPA of the bank improved to 2.0 per cent as of March 31, down 80 bps y-o-y and 36 bps q-o-q. The net NPA ratio at 0.4 per cent was also 34 bps better y-o-y and 8 bps q-o-q.

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