Axis Bank, India’s No 3 private lender, beat street estimates on Friday with a nearly 24% rise in third quarter net profit, helped by higher income from fees and interest, although provisions rose due to a rise in bad loans.
Net profit in the third quarter ended December rose to `1,100 crore from `890 crore a year ago, the bank said. Net interest income grew 23.5% to `2,140 crore. Shares of the bank, which has a market capitalisation of nearly $8 billion, rose to its highest level since December, after the results announcement.
“It was a challenging environment,” Somnath Sengupta, chief financial officer told reporters. “We have been able to contain our risks and maintain our credit portfolio. It was a good quarter for us.” Fee income from corporate credit, retail banking, business banking, treasury grew 26% to about `1,200 crore. The bank was estimated to post net profit of `1,013 crore, according to Thomson Reuters IBES.
Net interest margin, a key gauge of profitability, fell 5 basis points to 3.75%. The bank estimates net interest margins between 3.25% and 3.5% for the full fiscal year.
It expects net interest margin in the March quarter to contract because of higher cost of funds, Sengupta said.
Trading profits fell 13% and fee income from capital markets also fell about 12%, it said. It added about `540 crore to total bad loans in the quarter. Net non performing loans — or bad loans — as a proportion of net assets rose to 0.39% in the period.
Axis Bank said loans grew over 20%, largely driven by credit to retail and small and medium enterprises.
It trades at twice its book value compared with 1.3 times for State Bank of India, Punjab National Bank and Bank of India and 1.6 times for ICICI Bank.
Of the 44 analysts tracking the stock, 37 have a ‘’buy’’ or a ‘’strong buy’’ rating on it while six rate it a ‘’hold’’, according to Thomson Reuters’ Starmine. One analyst rates the stock a ‘’sell’’. On Friday, Axis Bank’s shares closed 5.65% higher at `1,009.05 on the BSE. Reuters
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