Axis Bank trumps forecasts with 86% surge in Q2 profit as provisions drop

Axis Bank on Tuesday reported a massive 86% jump in standalone net profit for the three months ended September thanks to a sharp drop in provisions for possible bad loans.

India’s third-largest private-sector bank said it posted a net profit of Rs 3,133 crore for the second quarter, up from Rs 1,682 crore clocked during the corresponding period of 2020-21. 

This exceeds expectations of analysts, who had projected the net profit to be around Rs 3,000 crore.

Axis Bank said the surge in profit was mainly on account of a significant growth in its loan book across certain segments, limited restructuring as well as an improvement in asset quality metrics. 

The bank reported an 8% increase in its net interest income for the quarter on a year-on-year basis to Rs 7,900 crore and its lowest gross non-performing asset (NPA) ratio in 20 quarters. 

Axis Bank Q2: Other highlights

1) Gross NPA fell to 3.53% of the loan book from 3.85% in the June quarter and 4.18% a year earlier.

2) Net NPA ratio was at 1.08%, down 12 basis points sequentially but up 5 bps year on year.

3) Specific loan loss provisions stood at Rs 927 crore compared with Rs 2,865 crore in Q1 and Rs 724 crore a year earlier.

4) Total provisions and contingencies fell to Rs 1,735 crore from Rs 3,302 crore in Q1 and Rs 4,343 crore a year earlier.

5) Provision coverage, as a proportion of gross NPAs stood at 70% versus 77% a year earlier.

Axis Bank management commentary

Axis Bank MD and CEO Amitabh Chaudhry said the lender is seeing “solid progress” on the business front. “We continue our focus on SMEs and mid-corporate segments, and on the retail side we see better disbursements and growth driven by secured products,” he said.

The bank said slippages in Q2 moderated due to regulatory forbearances that do not exist in the current quarter. Recoveries and upgrades from NPAs during the quarter were Rs 4,757 crore while write-offs were Rs 2,508 crore. Consequently, net slippages in NPAs (before write-offs) fell to Rs 707 crore from Rs 3,976 crore in the first quarter.

Net slippages in NPAs (before write-offs) for retail loans stood at Rs 697 crore, the bank said.

The bank’s subsidiaries also delivered strong performance with reported total profit after tax of Rs 267 crore, up 38% from a year earlier. Axis AMC’s average AUM for the quarter grew by 52% year on year to Rs 2,38,177 crores and its Q2 profit rose 38% to Rs 74 crore. Axis Finance’s profit jumped 82% to Rs 78 crore while Axis Securities’ net profit for Q2 soared 57% to Rs 61 crore.