Axis Bank on Thursday reported a 32% growth in net profit for the first quarter ended June to Rs 742 crore from Rs 562.04 crore in the corresponding period last year. However, there was a fall in the net interest margins (NIMs) sequentially. NIMs during April-June were at 3.71%, lower than of 4.09% in the last quarter. Axis Bank aims to keep their NIMs in the range of 3.5% to 3.7% this year depending upon balance sheet growth.
“The impact of payment of interest on savings deposits on a daily product basis and the CRR hike was 20 basis points on our margins,” said Somnath Sengupta, executive director and chief financial officer, Axis Bank. Other than this, a rise in term deposits also led to a fall in NIMs. “Term deposits grew by Rs 13000 crore on an average basis this quarter,” said Sengupta. Wholesale term deposits constitute 65% of the total term deposits, the rest being retail. Most of the term deposits lie in the 6 months to 1 year tenure.
Axis Bank had raised interest rates on deposits this quarter, which they say is a frequent exercise as and when the need arises. Currently, the bank offers 6% on deposits up to 1 year, 6.5% for 1 year to 14 months and 7% for 3 years to 5 years. The average interest out go on term deposits increased from 4.54% to 4.61% this quarter.
Despite a poor showing sequentially, NIMs increased in April-June from 3.34% a year ago. The bank also saw its net interest income jump 45% on year to Rs 1,514 crore from Rs 1,046 crore in the same quarter in 2009.
Growth in the bank’s fee income in April-June too helped improve profitability. It grew 18.58% on year to Rs 743 crore. Fee income was bolstered by large and mid-sized corporates from where the bank’s commissions rose 42% on year.
Axis Bank saw advances rise 39% year on year in April-June on the back of loans given to telecom firms for 3G and broadband licence payments. However, the bank sees credit growth moderating along the year as these loans age from 6 months to 1 year only.
Large and mid-corporate loans, which contributed most to the credit growth comprised 55% of the loan book. The bank said asset-liability mismatch management was not a concern. “95% of our savings accounts are core that mimick 5-year term deposits while 75% of the current accounts mimick 3-year term depoits,” said Sengupta. The duration of the assets is around 2.5 years while liabilities are around 2 years.
Axis bank’s current account savings account (CASA) deposits also dipped to 40.17% from around 46% in the last quarter. “This is a seasonal phenomenon, CASA usually picks up in the rest of the year,” said Sengupta.
However, the bank fared well on the asset quality front.
Net non-performing assets (NPAs) were at 0.35% as on June 30, 2010, compared with 0.41% in the same quarter last year and 0.36% as on March 31, 2010.
Axis Bank has provisioning coverage ratio of 76.6% which includes prudential write-offs. The bank’s capital adequacy ratio (CAR) stood at 14.54% for April-June compared with 15.28% last year and 15.8% as of March-end.. Tier-I capital was 10.32% as at the end of Q1 FY11, as against 9.39% at the end of Q1 FY10 and 11.18% at the end of FY10.
With NewsWire18 inputs
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