Axis Bank Reports 18% Profit Increase in Q2, Faces Tough Market Challenges

Axis Bank has announced an 18% rise in net profit for the September quarter, reaching ₹6,918 crore, thanks to strong trading income and low operating costs. This figure exceeded analysts’ expectations, which estimated profit at ₹6,370 crore. In the same quarter last year, the bank reported a profit of ₹5,863 crore.

The bank’s net interest income, which is the difference between the interest it earns on loans and the interest it pays on deposits, grew by 9% compared to last year, totaling ₹13,483 crore. However, the net interest margin for this quarter fell slightly to 3.99%, down from 4.11% a year earlier.

Amitabh Chaudhry, the managing director of Axis Bank, noted that current market conditions present many challenging factors. He mentioned that even though the bank has excess liquidity, deposit rates are not decreasing. There are strict guidelines on credit-to-deposit ratios, and some areas of asset quality are worsening. Additionally, good customers are not demanding higher interest rates. Despite these challenges, the bank managed to maintain steady net interest margins and improve asset quality.

The gross non-performing asset (GNPA) ratio decreased to 1.44% for this quarter, compared to 1.73% a year ago. The net NPA ratio also dropped slightly to 0.34% from 0.36% in the same period last year.

Provisions for bad loans rose significantly to ₹2,204 crore, up 170% from ₹814 crore last year. Within this, specific loan loss provisions accounted for ₹1,441 crore. Fresh loan defaults increased to ₹4,443 crore from ₹3,254 crore a year earlier.

Pranav Gundlapalle, head of India financials at Bernstein, commented that the profit growth was driven by low-quality assets and noted ongoing issues with asset quality, increased slippages, and loan loss provisions. He pointed out that while total loans increased by 11% year-on-year to ₹10 lakh crore, retail loans were the main contributor, growing 15% to reach ₹5.98 lakh crore, which represents 60% of the bank’s net advances. In detail, the home loan segment rose by 5%, personal loans increased by 23%, and credit card advances grew by 22%. Loans to small and medium enterprises (SMEs) also showed healthy growth, increasing by 16% to ₹1.1 lakh crore, while corporate loan growth remained modest at 3%.