Axis Bank posts one of its strongest quarters as recoveries spike and slippages halve

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The country’s third largest private lender, Axis Bank, reported a 25 percent growth in net profit for the December quarter, helped by higher recoveries, a rise in fee income and a steep decline in provisions, as there weren’t as many new bad loans as earlier.

The bank, which struggled with controversies throughout last year, reported net profit of Rs 726.44 crore for the quarter under review, up from Rs 580 crore a year ago. Sequentially, the bank’s bottomline jumped 68 percent from the Rs 432 crore reported for the September quarter.

The 25 percent fall in provisions was primarily on account of fresh slippages halving from their previous quarter levels. Slippages for the quarter ended December came in at Rs 4,428 crore, as against nearly Rs 9,000 crore in the September quarter.

The quarter ended September was a bad one for the private lender, which witnessed one of its highest-ever level of slippages on a quarterly basis. The bank was then required by the Reserve Bank of India to disclose an additional Rs 5,633 crore as divergence in classification of NPAs.

Jairam Sridharan, Chief financial Officer at Axis Bank, said that the bank’s watchlist of doubtful accounts now account for exposure of just Rs 5,300 crore, as against Rs 22,600 crore seven quarters ago. A majority of the new slippages came from accounts rated BB or lower, not chunky accounts.

“The worst in terms of fresh stress being created is certainly behind us, (we are) not seeing any material increase in the stress pools or any new sectors particularly worrying and (but) you will continue to see recognition of identified stress pools such as BB and below rated accounts or the power sector will continue to see some of it,” Sridharan said.

According to the CFO, the bank has “largely starting to see the shift of the next phase, now that the recognition process is over and more resolution will take place. In the coming quarter, looking forward to see more conversation and commentary on the resolution of assets.”

Highest recoveries in 5 years

Axis Bank also boosted its recoveries in the quarter gone by to its highest in almost five years, having recovered Rs 4,008 crore worth of assets.

This was a jump of over 280 percent from Rs 1,048 crore recovered in the previous quarter and over 1,000 percent higher than the Rs 350 crore recovered in the same quarter a year ago, thereby reducing the bank’s provisioning requirement.

While fee income grew by 24 percent, a massive drop in treasury profits to Rs 200 crore from Rs 1,500 crore on hardening yields dented the lender’s other income to Rs 2,593 crore during the quarter as against Rs 3,400 crore reported in the corresponding quarter last year.

During the quarter, Axis Bank infused over Rs 8,000 crore of capital, lifting its overall capital ratio to 18 percent, with core tier-I capital at 14.13 percent.

Speaking about the ongoing SEBI probe into the leakage of its Q2 results on some WhatsApp groups hours before the official announcement, Sridharan said the bank has taken very strong measures to combat the issue and that “appropriate investigations are going on”.

The bank will interact with the markets regulator on the findings of the probe, Sridharan added.moneycontrol