Private sector lender Axis Bank on Tuesday reported 1 per cent decline in its net profit to Rs 2,154 crore for the quarter ended March 31, as the lender decided to beef up its contingency reserves.
The third largest private sector bank has added around Rs 300 crore to the contingency pool, taking the total amount to Rs 480 crore. Some banks set a proportion of profit as contingency reserves, though there is no regulatory mandate. In the third quarter, Axis Bank used Rs 200 odd crore from the contingency pool as bad loan increase after the Reserve Bank of India asked several lenders to classify certain accounts as non-performing.
Total provisioning was Rs 1,168 crore during the quarter as compared to Rs 710 crore in the corresponding period of the previous year. The increase in provisioning is mainly due to adding to the contingency pool and provisioning of Rs 100 crore for advances made to the Punjab government for foodgrain purchases.
While overall asset quality of the bank remained stable with gross NPA at 1.67 per cent of gross advances, the bank sounded caution on the asset quality front.
“The asset quality largely remained stable on a sequential basis but the stressed asset outlook remains elevated and the operating environment continues to remain challenging,” said Jairam Sridharan, chief financial officer, Axis Bank, during the post-earnings conference call.
Net Interest Income (NII) of the bank grew by 20 per cent during the period under review on the back of 21 per cent growth in advances. Retail advances grew by 24 per cent.
“The core earning is driven by NII growth with core operating profit growing 15 per cent year-on-year. There was strong growth in advances in the corporate and retail segments,” Mr Sridharan said.
Net interest margin of the bank swelled, as costs of funds fell, to 3.97 per cent in Q4 as compared to 3.81 per cent of the same period of the previous year and 3.8 per cent recorded during the third quarter.
The low cost deposits also saw a healthy growth of 17 per cent and the proportion of current and savings account of total deposits was at 47 per cent.
The third largest private sector bank has added around Rs 300 crore to the contingency pool
