Mumbai: Third largest private sector lender Axis Bank Tuesday reported a 131 percent surge in net income for the December quarter at Rs 1,681 crore boosted by a huge jump in recoveries from written-off accounts.
Under a new management, the city-based lender also laid out a strategy to concentrate on growth, profitability and sustainability going forward with a focus on a massive spike in return on equity at 18 percent from the present 7.3.
The core net interest income grew 18 percent to Rs 5,604 crore on an 18 percent loan growth and a 0.09 percent expansion in net interest margin which rose to 3.47 percent.
However, it was a handsome 54 percent growth in non- interest income at Rs 4,001 crore, fuelled primarily by recoveries of Rs 998 crore in written-off assets, which helped the bottomline.
The recoveries were primarily from the steel sector accounts where it had made 100 percent provisions, chief financial officer Jairam Sridharan told reporters.
The high quantum of recoveries also helped the bank set aside an extra Rs 600 crore as provisions towards below investment grade accounts, which has come down 14 percent during the quarter to Rs 7,645 crore.
The newly-appointed managing director and chief executive Amitabh Chaudhry said a third of the non-investment grade exposure is in the power sector.
When asked about the over Rs 800-crore exposure to the crippled infra lender IL&FS, Chaudhry said a third of the outstanding has slipped into dud loans during the reporting quarter, and the rest is also at below investment grade.
He said the bank is also "comfortable" with its exposure to non-banking lenders.
The overall slippages during the quarter stood at Rs 3,746 crore mostly due to the troubles in the mining sector, Sridharan said, adding the gross NPAs ratio picked up to 5.75 from 5.96 in the quarter ago.
Chaudhry succeeded Shikha Sharma to the corner office at the lender, after the RBI cut short the incumbent's tenure for unspecified reasons. The RBI action came in after the bank was found to have under-reported NPAs by a cumulative Rs 10,000 crore for two consecutive years.
Even though the bank is yet to receive a report of the risk-based supervision from the regulator for under-reporting or divergences in FY18, but informally wrote to the RBI, asking for some clarity ahead of the results, Chaudhry said.
Accordingly, it was told that two assets totaling an exposure of Rs 225 crore fall as "divergent" and was asked to make an extra provision of Rs 100 crore in two more accounts.
The bank has already classified the two accounts as NPAs in the first half of the current fiscal, while the provision hit was taken in the current quarter.
The overall provisions came in at Rs 3,054 crore for the reporting quarter, including Rs 600 crore provisions, but the amount of money set off was helped by a write-back of Rs 321 crore on investment depreciation done earlier.
Loan growth continued to be driven by a 20 percent jump in the retail book, taking its contribution of the overall book to 49 percent.
Unlike the previous quarters, the home loan book saw some sluggishness during the quarter and it was the unsecured piece including personal loans and credit cards, which drove the retail book up.
Chaudhry said the bank is tracking the high margin businesses on the retail front and underlined that there is no difficulty with home loans segment.
Corporate loan growth came in at 13 percent and the bank will try to push up the number going ahead, he said.
Admitting to certain mistakes on the corporate lending side earlier, Chaudhry said he has launched a huge exercise on overall functioning, including risk management and provisioning policies.
The bank is targeting to massively increase its return on equity to 18 percent from 7.3 percent for the first nine months of the fiscal, as part of over the next three years.
Chaudhry, who has already made internal changes like getting executive director Rajiv Anand to head the wholesale banking vertical, said he is bolstering the leadership by making more senior level appointments to the bank but did not name any of the executives joining.
Sridharan said the bank aspires to get net interest margin into the 3.50-3.75 percent range and will be working towards the same in the future.
The share of the low-cost current and savings account deposits slipped to 46 from 48 percent. Overall capital adequacy ratio stood at 16.40 including profit for nine months, with the core tier-I at 13.07.
The bank scrip gained 0.74 percent at Rs 660.80 a piece on the BSE as against a 0.18 percent correction in the benchmark. (PTI)
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