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Axis Bank: Lower Slippages Save Bottomline Performance - Views on News from Equitymaster

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  • Feb 6, 2018 - Axis Bank: Lower Slippages Save Bottomline Performance

Axis Bank: Lower Slippages Save Bottomline Performance
Feb 6, 2018

Axis Bank declared the results for the third quarter of the financial year ended March 2018 (3QFY18). The bank reported a 25.3% YoY growth in profits during the quarter on the back of an improvement in asset quality.

Performance summary
  • Overall advances grew by 21% YoY during the quarter. The key driver for the growth in advances came in from the retail banking front. The retail loans grew at a healthy pace of 29.3%YoY during the quarter. Retail loans now accounts for 46% of the overall advances as compared to 43% a year ago. The bank has increasingly shifted its focus to retail banking and the same is reflected in their numbers. Retail loans have grown at a CAGR of 27% for a five-year period from March-13 to March-17.
  • Beneath the retail loan category, personal loans and small business banking loans grew at a robust pace of 44% and 104% respectively.

    (Rs m) 9MFY17 % of total 9MFY18 % of total Change
    Advances 3,471,750   4,209,230   21%
    Retail 1,495,380 43.1% 1,932,960 45.9% 29.3%
    Corporate 1,544,290 44.5% 1,727,430 41.0% 11.9%
    SME 432,080 12.4% 548,840 13.0% 27.0%
    Deposits 3,707,900   4,089,670   10.3%
    CASA 1,764,510 47.6% 2,017,110 49.3% 14.3%
    Term deposits 1,943,390 52.4% 2,072,560 50.7% 6.6%
    Credit deposit ratio 93.6%   102.9%    
  • Coming to the liability side of the business, the low cost Current Account Savings Account (CASA) deposits continued to witness healthy growth. CASA grew at 14.3% YoY during the quarter. The share of CASA in the overall deposits now stands at 49.3% as compared to 47.6% a year ago. Increasing share of CASA in overall deposits, would help the bank to lower its cost of funding.
  • Current Account (CA) deposits grew at a robust pace of 21% YoY, while Savings Account (SA) deposits too grew at a healthy pace of 11%.

    Rs (m) 3QFY17 3QFY18 Change 9MFY17 9MFY18 Change
    Interest income 111,010 117,216 5.6% 333740 340091 1.9%
    Interest expense 67,673 69,900 3.3% 200095 201218 0.6%
    Net Interest Income 43,337 47,315 9.2% 133645 138873 3.9%
    Net interest margin (%)         3.38%  
    Other Income 34,002 25,931 -23.7% 86782 81784 -5.8%
    Other Expense 30,937 34,708 12.2% 88329 101434 14.8%
    Provisions and contingencies 37,958 28,110 -25.9% 95,357 82,934 -13.0%
    Profit before tax 8,444 10,428 23.5% 36,741 36,289 -1.2%
    Tax 2,649 3,163 19.4% 12,199 11,645 -4.5%
    Profit after tax/ (loss) 5,796 7,264 25.3% 24,542 24,644 0.4%
    Net profit margin (%) 5.2% 6.2%   7.4% 7.2%  
    No. of shares (m)*         2564.1  
    Book value per share (Rs)         0.00  
    P/BV (x)*         2.2  
    *Book value as on 30th September 2017
  • Net Interest income grew marginally by 9.2% YoY during the quarter. Net interest margins stood at 3.38% during the quarter. The deterioration was mainly on account of a slight reduction in the yield earned on advances. The bank expects further deterioration in NIMs by 0.20% by the end of the current fiscal year.
  • The net profits grew by 25.3% mainly on the back of lower provisions and contingencies. The provisions reduced by 26% YoY as compared to a year ago.
  • Fresh slippages during the quarter came in at Rs 44.28 billion as compared to Rs 89.36 billion in the preceding quarter. Of the Rs 44.28 billion fresh slippage, corporate slippages stood at Rs 29.80 billion and 93% of it came from low rated BB & below accounts. The rest came in from the retail and SME segment.
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