Axis Bank Q2 net up 19%; reports pain in unsecured loans

Axis Bank's consolidated net profit for the September quarter rose by 19.29 per cent to Rs 7,401.26 crore, but the lender reported a pain in the unsecured lending segment. On a standalone basis, the third largest private sector lender's net profit grew 18 per cent to Rs 6,917.57 crore in the July-September quarter of FY2024-25.

The bank, which is among the first major lenders to report its earnings for the quarter, saw the core net interest income grow by 9 per cent to Rs 13,483 crore during the quarter on the back of an 11 per cent increase in the net advances and the net interest margin narrowing by 0.12 per cent to 3.99 per cent.

The non-interest or other income shot up 34 per cent to Rs 6,722 crore, helped majorly by a Rs 1,111 crore gain on the trading income front.

The bank managed a 14 per cent growth in the total deposit front and made it clear that it is not using price as a lever to attract liabilities.

Its total income increased to Rs 37,142 crore during the quarter under review against Rs 31,660 crore in the same period last year, Axis said in a regulatory filing. The bank earned an interest income of Rs 30,420 crore during the quarter compared to Rs 26,626 crore a year ago.

Its chief executive and managing director Amitabh Chaudhry told reporters that the current market conditions are "tough" and the bank is up against factors like worsening of asset quality especially on the unsecured loans front and also elevated deposit rates despite the excess liquidity conditions.

Its chief financial officer Puneet Sharma said the overall slippages came at over Rs 4,400 crore and the retail book contributed Rs 4,013 crore in non-performing additions. A bulk of the retail contribution was from unsecured loans, he said, without specifying the number.

A senior bank official said there has been an uptick in the NPAs in the unsecured loans including credit cards and personal loans because of what he described as indebtedness and build-up of leverage at the borrower front.

After availing a credit card or a personal loan, customers are taking newer loans, the official said, adding that the bank is treading with caution on the unsecured loans front and has taken measures including curtailment of limits and tightening of credit scores.

The bank reported a 22 per cent growth in the credit card book and a 23 per cent on the personal loans front.

It is facing headwinds even in the case of microfinance portfolio with an increase in delinquency levels being reported, an official said, adding that it is careful on over-leverage even in this segment.

The official added that as the overall MFI book is less than 2 per cent of the overall book, there is no fear of stress denting the overall health.

It can be noted that for over a year, the regulator has been flagging risks on the unsecured lending portfolios and also sought to slow down growth in it by increasing the risk weights.

The bank has made an additional provision of Rs 520 crore on a prudential basis, choosing to strengthen the balance sheet by reporting a lower profit growth, its CFO said, without sharing the exact reasons for setting aside the additional money.

The reported gross NPA improved to 1.44 per cent from the quarter-ago period's 1.54 per cent, on the back of an overall improvement in slippages.

The bank is not mulling any portfolio selldown to reduce the elevated credit-deposit ratio, Sharma said.

Its overall capital adequacy stood at 16.61 per cent as of September 2024, with the core buffer at 14.12 per cent.

Among the subsidiaries, Axis Finance reported a 24 per cent increase in its net for the April-September period at Rs 327 crore, asset management company's PAT was up 29 per cent to Rs 244 crore during the same period and Axis Capital reported a 29 per cent surge to Rs 87 crore.

Without mentioning its exact concerns, the bank management said it will be seeking clarifications on recent RBI proposals on private banks' ownership of companies and also refrained from commenting further on capital markets regulator Sebi's order on Axis Capital.

Axis Bank shares closed 1.74 per cent down at Rs 1,132.15 apiece on the BSE as against a 0.61 per cent correction on the benchmark.