Axis Bank’s first quarter (April-June) net profit surged 27% year-on-year to Rs 942 crore, beating analysts’ estimates by a wide margin. Net interest income—the difference between interest earned and interest paid—climbed 14% to Rs 1724.1 crore, driven by a healthy growth in the loan book.
“We are happy to maintain CASA ratio at 40% and would sustain a NIM between 3.25-3.50%,” said Somnath Sengupta, ED & CFO at a tele-conference.
“Our endeavour is to retain the same level in FY12. However, we have seen a rise of 200 basis points in the cost of term deposits in the last one year. It has impacted our NIM. The sequential contraction in NIM was expected.”
Total advances or loans expanded more than 21% to Rs 1.32 lakh crore, surpassing the Reserve Bank of India’s credit growth projection of 19% in FY12. This assumes significance especially in the so-called slack season (April to September). The bank expects report a loan book growth above 19% in FY12.
The better-than-expected quarterly performance fired up the stock price, which rose nearly 5% to Rs 1298.
However, the net interest margin fell slightly from 3.44% to 3.28% quarter-on-quarter basis.
"The reduction in NIM during Q1FY12 was driven by a slower build up in CASA deposits leading to persistence of higher cost term deposits plus upward revision of rate for savings bank deposits," the bank said in a release.
Deposits grew at a faster pace at 24.50% to Rs 1.84 lakh crore while CASA (current account and savings account) deposits grew at a slower pace by 25.59% to Rs 74,414 crore. CASA ratio stood at 40.53% to total deposits as against 40.17% in March quarter.
In a rising interest rate scenario, CASA is cheap source of funds as compared to longer term deposits. Banks pay 0-4% interest in CASA as asgainst 7-11% for term deposits.
Gross non-performing asset (NPA) too improved to 1.06% versus 1.13% year-on-year. Net NPA stood at 0.31% against 0.35%. However, net NPAs sequentially rose by 5 basis points compared to March quarter’s 0.26%.
The bank restructured loans aggregating Rs 107 crore during the quarter. Restructured loans majorly (76.24%) came from large and mid corporates while SME sector forms only 11.80% of restructured assets.
Provisions declined 47% to Rs 175.84 crore from Rs 333 crore a year back. Other income increased almost 17% to Rs 1,168 crore from Rs 1,001 crore.
The bank is still awaiting certain approvals from the Reserve Bank of India, to complete its acquisition of Enam’s brokerage and investment banking business.
With a capital adequecy ratio of 12.53%, the lender does not have any plan to raise equity capital this year.
"We will look at raising equity capital in 2012. However, we have not yet decided on the amount," Sengupta said.
Source: www.moneycontrol.com
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