Axis Bank Q4 Soars Past Estimates with 17% Profit Jump
Axis Bank outperformed expectations for profit in the last quarter of fiscal year 2024. The bank reported a net profit of Rs 7,129.7 crore, which is a significant improvement from a loss of Rs 5,728.4 crore in the same quarter last year. This profit is also 17.4% higher than the previous quarter and exceeded analyst predictions of Rs 6,261 crore.
Due to the recent acquisition of Citibank’s consumer banking business in March 2023, a year-to-year comparison of Axis Bank’s profit isn’t entirely accurate. However, on a broader scale, the bank’s financial health shows improvement.
- Total income for the last quarter jumped to Rs 35,990 crore, compared to Rs 28,758 crore the previous year.
- Net interest income, a key indicator of profitability, also rose 11% year-on-year to Rs 13,089 crore.
- The bank’s profitability ratio (net interest margin) increased slightly to 4.06% for the March quarter.
Axis Bank Q4 FY24 highlights:
Profits and Income
- Axis Bank saw a healthy profit increase of 17.4% in Q4, reaching Rs 7,129.7 crore compared to the previous quarter’s Rs 6,071 crore.
- Net interest income, which reflects earnings from interest on loans minus interest paid on deposits, also grew slightly by 4% to Rs 13,089 crore.
Asset Quality:
- The bank’s asset quality improved with a decrease in both gross NPA (non-performing assets) and net NPA. Gross NPA fell to 1.43% from 1.58% in the previous quarter, and net NPA came down to 0.31% from 0.36%.
Business Growth:
- Overall business for Axis Bank grew at a solid pace of 13% during Q4.
- Deposits, a crucial source of funding for loans, saw a significant 13% year-on-year increase to Rs 10.7 lakh crore.
Looking Forward:
- The bank’s CEO, Amitabh Chaudhry, anticipates continued tightness in the credit market, potentially limiting both deposit and loan growth in the coming year.
- However, he highlighted the bank’s focus on strengthening its deposit base throughout FY24, which is expected to contribute to sustained growth in deposits for FY25 as well.
Axis Bank Q4 FY24 Highlights: Loan Growth and Funding
Loan Growth:
- Advances (loans) grew at a healthy rate of 15% year-on-year to Rs 9.65 lakh crore.
- Retail loans, a major driver for the bank, saw even stronger growth of 20% YoY, representing 60% of the bank’s net advances.
- Across different loan categories, there were notable increases:
- Home loans: 5% YoY
- Personal loans: 31% YoY
- Credit card advances: 30% YoY
- Small business loans: 33% YoY
- Rural loans: 30% YoY
- Corporate loan demand remains strong, but tight liquidity is pushing companies towards the debt market for borrowing.
Funding and Liquidity:
- The bank is focusing on strengthening its deposit base. The current account to savings account ratio is 43%, and term deposits grew a significant 22% YoY to Rs 6.09 lakh crore.
- The bank’s credit-to-deposit ratio stands at 90.31%, indicating some tightness in liquidity.
- Management expects fee income from debt capital markets to play a bigger role in future, as tight liquidity may limit traditional interest income (Net Interest Income) growth.
Provisions:
- Provisions and contingencies increased significantly this quarter, with Rs 832 crore specifically allocated for loan losses.
- This rise in loan provisions is attributed to an increasing share of unsecured loans in the bank’s portfolio.
- Importantly, the bank did not utilize any remaining Covid-19 provisions this quarter, with those funds being reclassified for other purposes.
Axis Bank Q4 FY24 Highlights: Provisions and Capital
Provision Management:
- The bank reclassified Rs 5,012 crore previously set aside for Covid-19 losses as general provisions.
- This reflects a receding need for pandemic-specific reserves.
- The bank maintains a strong overall provisioning buffer of Rs 12,134 crore, exceeding the amount needed to cover Non-Performing Assets (NPAs).
- The bank’s provision coverage ratio, a measure of protection against potential loan losses, stands at a healthy 79%.
- There were no reversals of provisions related to the bank’s investments in Alternative Investment Funds (AIFs). The bank had previously set aside Rs 181 crore for potential losses in AIFs during the prior quarter.
Loan Performance:
- Credit cost, reflecting the expense of potential loan defaults, remained low at 0.32% for the quarter.
- New non-performing loans (net slippages) were contained at Rs 398 crore, with retail loans contributing a larger share (Rs 1,061 crore) to slippages.
- However, the bank recovered or upgraded a significant amount of loans (Rs 2,155 crore), partially offsetting the slippages.
- Written-off loans amounted to Rs 2,082 crore.
Capital Adequacy:
- The bank’s capital adequacy ratio, a measure of its ability to absorb losses, stands at a comfortable level of 16.63%.
- The Tier 1 capital ratio, a key measure of core capital strength, is also healthy at 13.8%.
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