Axis Bank Q1 Results: Net profit grows 40%, asset quality improves
Axis Bank’s financial results for the first quarter of the fiscal year 2023-2024 (April to June 2023) demonstrated a robust performance with a 40 percent rise in net profit. The bank’s net profit for this quarter reached Rs 5,790 crore, compared to Rs 4,125 crore in the same quarter of the previous year.
However, the bank’s reported net profit missed the expectations of analysts according to a poll conducted by Moneycontrol. The analysts’ consensus estimate for net profit was Rs 5,889 crore, indicating that the actual reported figure fell short of this expectation.
On a positive note, Axis Bank’s net interest income (NII) exhibited substantial growth, increasing by 27 percent year-on-year (YOY) to reach Rs 11,959 crore. Net interest margin (NIM) for the first quarter of FY24 stood at 4.10 percent, marking a significant improvement of 50 basis points (bps) compared to the same period of the previous year.
The growth in NII and NIM signifies improved interest income and net interest spread, reflecting the bank’s ability to effectively manage its assets and liabilities. A higher NIM indicates that the bank is earning more from its lending activities and signifies increased efficiency in managing its interest income and expenses.
Overall, despite the bank’s net profit missing analyst expectations, the strong growth in net interest income and net interest margin demonstrates Axis Bank’s positive financial performance and its efforts to enhance its profitability and interest spread in a dynamic banking landscape.
Axis Bank’s financial results also showed a positive trend in its asset quality. The gross non-performing assets (GNPA) of the bank witnessed a decline, reducing to 1.96 percent as compared to 2.76 percent in the same period of the previous year. This indicates a healthier loan portfolio, with a lower proportion of bad loans or non-performing assets.
Furthermore, the net non-performing assets (NNPAs) of the bank also showed improvement, falling to 0.41 percent in the first quarter of FY24, in contrast to 0.64 percent reported during the corresponding quarter of the previous year. A decline in NNPAs implies that Axis Bank’s efforts in managing and recovering bad loans have been successful, resulting in a more robust loan book and a lower level of impaired assets.
The improvement in asset quality is a positive indicator for the bank, demonstrating its effective risk management practices, proactive measures to identify and address credit risks, and efforts to maintain a healthy credit portfolio. Lower levels of non-performing assets enhance the bank’s overall financial stability and provide a positive outlook for its future operations.
Overall, the decline in both gross non-performing assets (GNPA) and net non-performing assets (NNPAs) reflects Axis Bank’s commitment to sound credit risk management and highlights its ability to navigate through challenging economic conditions while maintaining a healthy and resilient loan portfolio.
In the trading session on July 26, Axis Bank’s shares closed at Rs 976.85 per share on the Bombay Stock Exchange (BSE), representing a 1.46 percent increase from the previous day’s closing price. This rise in share price indicates positive investor sentiment and reflects the market’s confidence in the bank’s financial performance and growth prospects.
Furthermore, Axis Bank reported a notable growth in total deposits during the period. The total deposits increased by 17 percent year-on-year (YOY), indicating strong customer confidence in the bank’s services and financial stability.
The bank’s savings account deposits witnessed significant growth, increasing by 22 percent YOY. Current account deposits also showed robust growth, rising by 23 percent YOY. These figures suggest that customers continue to prefer Axis Bank for their banking needs and are actively utilizing the bank’s savings and current account offerings.
In addition to savings and current account deposits, Axis Bank’s total term deposits also registered growth, expanding by 13 percent YOY. The growth in term deposits signifies that customers are opting for the bank’s fixed deposit and time deposit products.
Moreover, the share of current account and savings account (CASA) deposits in the bank’s total deposits increased to 46 percent. This represents an increase of 182 basis points (bps) compared to the previous year, indicating a higher proportion of low-cost funds in the bank’s deposit mix. CASA deposits are considered cost-effective for banks as they generally do not carry interest expenses similar to term deposits.
Overall, the growth in total deposits, particularly in savings and current accounts, and the higher share of CASA deposits are positive indicators for Axis Bank. These trends suggest that the bank is effectively attracting customer deposits and positioning itself for sustainable growth and profitability in the banking industry.
Axis Bank’s advances, which represent the total amount of loans extended to customers, witnessed significant growth during the period. The advances grew by 22 percent year-on-year (YOY), reaching a total of Rs 8.58 lakh crore. This growth in advances indicates that the bank is actively expanding its lending activities and providing credit support to various sectors of the economy.
Within the domestic lending portfolio, Axis Bank experienced a remarkable 26 percent YOY increase in net loans. This growth in domestic loans demonstrates the bank’s focus on catering to the needs of the Indian market and supporting businesses and individuals within the country.
The bank’s retail loans, which encompass loans extended to individual consumers, grew by 21 percent YOY, amounting to Rs 4.97 lakh crore. Retail loans accounted for 58 percent of the bank’s net advances, highlighting the bank’s strategic emphasis on retail lending and its success in attracting individual borrowers.
The significant share of retail loans in the bank’s net advances indicates its active participation in areas like home loans, personal loans, auto loans, and other consumer finance segments. Retail lending often provides a diversified and stable loan book, and the strong growth in this segment showcases Axis Bank’s ability to tap into the retail market and effectively manage credit risks in this portfolio.
Overall, the impressive growth in advances, particularly in domestic loans and retail lending, reflects Axis Bank’s dynamic approach in expanding its lending operations and its success in attracting borrowers in both retail and corporate segments, positioning the bank for continued growth and profitability in the banking industry.
