MUMBAI: The third largest private sector lender Axis Bank opened the earnings seasons for the June quarter in the financial services space Thursday on a bad note, reporting a 4% decline in net income at Rs 5,806 crore despite a reasonable performance in its core business.
The management said the red mark on the bottom-line is mainly due to a “technical impact” as the bank had a one-time hit of Rs 614 crore related to how it classifies some loans as bad. More importantly, on a sequential basis, net profit fell more sharply to the tune of 18%.
This technical loss came in after the bank recognized some cash credit, overdraft, and settled loan accounts as non-performing assets, which led to higher slippages and provisions. As a result, provisions more than doubled to Rs 3,948 crore in the June quarter from Rs 1,359 crore in the March quarter, Amitabh Chaudhry, the chief executive of the bank, told reporters in the earnings call Thursday.
"Prudent application of technical parameters to recognise slippages and consequent upgrades impacted reported asset quality, including provisions and contingencies. Technical impact is largely restricted to cash credit and overdraft products and one-time settled accounts,” the chief financial officer Puneet Sharma said, adding “without this one-off impact, net profit would have been stronger. The technical impact has adversely impacted net income by Rs 614 crore, RoA by 15 bps and RoE by 1.4%.”
Still, the bank said most of the loans that slipped due to this issue are safe as “80% of individual contracts that slipped because of this technical impact though continue to remain NPAs as of June 30, are fully secured. Hence economic loss due to the technical impact will be minimal over the life of such contract.”
Adjusted for this impact, gross NPAs stand at 1.41%, down 13 bps and net NPAs at 0.36%, up 2 bps, Sharma said.
However, the overall business remained steady with its balance sheet growing 9% to Rs 16.03 trillion, and capital buffers staying strong with the capital adequacy ratio of 16.85.
Net interest income inched up 0.8% to Rs 13,560 crore as against Rs 13,448 crore reported in the year ago period. On a sequential basis, net interest income fell by 2%.
The key net interest margin also declined to 3.80% from 3.97% in the previous quarter and from 4.05% in the year ago period.
The asset quality deteriorated with the gross non-performing asset ratio rising to 1.57, from 1.28 in March 2025, and from 1.54 in June 2024. Similarly, the net NPA ratio increased to 0.45 from 0.33 in Q4FY25, and 0.34 in Q1FY25.
In absolute terms, gross NPA rose to Rs 17,765 crore from Rs 14,490 crore q-o-q and from Rs 16,211 crore a year ago, while net NPAs rose to Rs 5,066 crore from Rs 3,685 crore in the previous quarter and Rs 3,553 crore in the year ago period.
Total deposits grew 9% to 11.61 trillion, of which current account deposits grew 9%, saving account deposits grew 3% and term deposits grew 12%, respectively. The share of Casa deposits in total deposits stood at 40%.
Advances grew 8% on-year and 2% on-quarter to Rs 10.59 trillion. Retail loans grew 6% to Rs 6.23 trillion and accounted for 59% of the net advances of the bank. The share of secured retail loans was 72% with home loans comprising 27%. Small business loans grew 15%, loan against property grew 21%, personal loans grew 5%, credit card advances rose 2% and rural loans grew 5%.
Shares of Axis Bank closed 1% lower at Rs 1,161 while the indices were down 0.63%.