Axis Bank , one of India's leading private sector banks, reported strong momentum in advances and deposits for the September quarter, despite a decline in net profit due to a one-time provision.

Key Financial Highlights

• Net Interest Income (NII) rose 1% quarter-on-quarter and 2% year-on-year
• Net Interest Margin stood at 3.73%
• Overall advances grew 12% year-on-year and 5% quarter-on-quarter
• Retail loans increased by 6% year-on-year
• Corporate loans rose 20% year-on-year
• Total deposits grew 11% year-on-year

One-Time Provision Impact

The bank made a one-time standard asset provision of ₹1,231 crore following RBI's annual inspection related to two discontinued crop loan products. This provision significantly impacted the quarterly profit.

Asset Quality

• Net slippages decreased to ₹280 crore from ₹1,861 crore in the previous quarter, indicating improved asset quality management

Business Growth and Operational Performance

Axis Bank showed robust growth in its core business areas:

• Corporate loan book grew 20% year-on-year
• Retail loans increased by 6% year-on-year
• SME loans expanded by 19% year-on-year

Management Focus

The bank's management emphasized focus on:

1. Deposit growth
2. Credit growth
3. Asset quality
4. Cost efficiency

Subsidiary Update

Axis Bank's subsidiary, Axis Finance, may be classified as an Upper Layer NBFC under RBI's regulatory framework when it crosses certain thresholds. However, no specific timeline was provided for this potential classification.

Outlook

Despite the one-time provision impacting the quarterly profit, Axis Bank's core performance indicators remain strong. The bank's focus on deposit and credit growth, improving asset quality, and cost efficiency positions it well for future growth in a competitive banking landscape.

The strong momentum in advances and deposits, along with decreased net slippages, demonstrates the bank's resilience and effective management strategies. The potential classification of Axis Finance as an Upper Layer NBFC also indicates the growing significance of the bank's subsidiaries in its overall business model.

Axis Bank , one of India's leading private sector banks, is expected to face headwinds in its second-quarter financial results, according to recent analyst projections. The bank's performance is anticipated to be impacted by margin pressure and rising costs, reflecting the challenging economic environment.

Projected Financial Performance

Based on average estimates from six brokerages, Axis Bank's Q2 FY2024 financial performance is expected to show some pressure:

Key Factors Influencing Performance

Several factors are contributing to the projected decline in profitability:

1. Margin Pressure: The bank's net interest margin is expected to contract to 3.59%, down 21 basis points sequentially and 40 basis points year-on-year. This compression is primarily due to deposit repricing outpacing improvements in lending yields.

2. Higher Funding Costs: The decline in net interest income is attributed to increased funding costs, which are not fully offset by loan yield improvements.

3. Operational Expenses: The cost-to-income ratio is anticipated to remain elevated, reflecting ongoing investments in branch expansion and technology.

Loan Growth and Asset Quality

Despite the challenges, Axis Bank is expected to maintain steady loan growth:

• Loan growth is projected at approximately 3% quarter-on-quarter and 10% year-on-year.
• However, NII growth is expected to lag behind loan growth.

In terms of asset quality:

• Slippages are estimated at ₹5,500 crore, showing a 33% decrease quarter-on-quarter but a 24% increase year-on-year.

Detailed Projections by ICICI Securities

ICICI Securities has provided more specific estimates for Axis Bank's Q2 performance:

These projections underscore the challenges Axis Bank faces in maintaining profitability amidst a complex economic landscape. While the bank continues to grow its loan book, the pressure on margins and increased operational costs are expected to impact its bottom line in the short term.

Investors and market watchers will be keenly observing how Axis Bank navigates these headwinds and whether it can implement strategies to mitigate the impact on its financial performance in the coming quarters.