Heavy loan losses continued to impact Axis Bank’s profitability, with a 73 per cent decline in December net at Rs 580 crore but the third largest private sector lender said the “peak of the pain” is done with.
The Shikha Sharma-led bank had posted a net profit of Rs 2,175 crore in the year-ago period.
Even though down 48 per cent from the preceding September quarter, the fresh slippages came at Rs 4,560 crore, with over Rs 1,600 crore coming from accounts which were not in a ‘watchlist’ of stressed assets.
The bank’s deputy managing director and chief financial officer Jairam Sridharan said the non-watchlist stress emanated from over five year-old loans in the iron and steel, infrastructure and construction sectors.
Sridharan said 85 per cent of the slippages this fiscal have come from the watchlist, which has now gone down to Rs 11,091 crore now and the bank has no plans of reviewing the list despite two consecutive quarters of stress flow from outside the list. He said accounts in the retail and SME segments totalling Rs 650 crore also contributed to the slippages in the reporting period, but refused to fully attribute it to the demonetisation exercise.
The impact of the demonetisation on its asset quality can be felt only in the next fiscal.
Sridharan, however, said that the peak of asset quality stress is behind the bank, which has been reporting a jump in bad loans since the RBI-imposed asset quality review.
“On an overall level, looking at what we are seeing right now, it gives a feeling that we have turned the corner with respect to slippages and the peak is behind us,” he said.
The provisions rose over five times to Rs 3,795 crore during the quarter primarily on the new slippages and also a four percentage point increase in provision coverage ratio to 64 per cent.
Sridharan said increasing the PCR by one percentage point requires a provision of Rs 230 crore.
There were two accounts with an outstanding of Rs 501 crore that went to strategic debt restructuring, while there were no 5/25 or S4A accounts.
The bank’s core net interest income was up 4 per cent to Rs 4,334 crore, while the non interest income helped the bottomline with a 45 per cent growth at Rs 3,400 crore.