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The country’s third-largest private lender by market capitalisation, Axis Bank, on Thursday reported its second-quarter net profit at ₹6,918 crore, up 18 per cent on a year-on-year (YoY) basis and 15 per cent sequentially, supported by steady margin and core income growth. The bank’s management, however, flagged higher stress in unsecured loans.
During Q2, the bank’s net advances rose at a slower pace than deposits, as the Reserve Bank of India (RBI) has asked lenders to maintain an optimum level of credit-deposit (CD) ratio. Net advances were up 11 per cent y-o-y at ₹9.99 lakh crore as on September end, whereas deposits rose 14 per cent y-o-y to ₹10.86 lakh crore.
Overall net interest income—difference between interest earned and expended—rose 9 per cent y-o-y to ₹13,483 crore in Q2. Net interest margin, a key indicator of lenders’ profitability, was stable at 3.99 per cent during the reporting quarter, and the lender aims to maintains at least 3.8 per cent NIM going ahead.
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“Current conditions present lot of variables which are tough. While we say we have excess liquidity, on the other side deposit rates are not coming down. There are clear guidelines on what CD ratio you can have,” said Amitabh Chaudhry, MD & CEO at Axis Bank. “We are seeing some worsening of asset quality in some unsecured and some other asset classes. The interest rates which are being demanded by good customers is also not increasing,” he said.
Asset quality
As on September 30, the bank’s gross non-performing asset ratio (GNPA) and net NPA ratio stood at 1.44 per cent and 0.34 per cent, respectively, as against 1.54 per cent and 0.34 per cent last quarter.
Provision and contingencies for Q2FY25 stood at ₹2,204 crore, of which specific loan loss provisions was at ₹1,441 crore. In addition to specific loan loss provisions, in the quarter, the bank made provisions amounting to ₹520 crore as a “prudent” measure. Additional provisions, the bank’s management stressed, must not be seen as the lender’s assessment of its expected asset quality. Annualised credit cost for the quarter ended September stood at 0.54 per cent.
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“Especially on unsecured side, we have seen an up tick both across cards and personal loans, in line with what we have seen in industry. There are no specific segments or sub-segments within those where we have specifically seen spike, it is across the board, across vintage, income segment, credit scores, but it is primarily around indebtedness and leverage build up,” Chaudhry said, adding that many customers are picking new loans just months after getting a different loan. The bank is taking policy related actions and tightening credit score requirement for fresh unsecured loans to ensure better asset quality.
| Parameter | Q2FY25 | YoY change (in per cent) | QoQ change (in per cent) |
|---|---|---|---|
| Advances | Rs 9.99 lakh crore | 11 | 2 |
| Deposits | Rs 10.86 lakh crore | 14 | 2 |
| Net interest income | Rs 13,483 crore | 9 | 0.3 |
| Net NPA ratio | 0.34 per cent | Flat | -2 basis points |
| Net profit | Rs 6,918 crore | 18 | 15 |
Source: Bank, exchanges
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