Mumbai: Axis Bank’s quarterly earnings rose around 4% as the rising cost of deposits ate into profitability and the bank predicted that the battle for deposits will continue as competition for funds intensifies.
The bank said net profit for the December quarter rose to ₹ 6,071 crore, up from ₹ 5,853 crore a year earlier. Net Interest Income (NII), the difference between interest earned and spent, grew 9% YoY to ₹ 12,532 crore.
The bank expects a war for deposits in the short and medium term. During the quarter under review, total deposits climbed 18% to ₹ 10.04 lakh crore, of which savings account deposits climbed 16% YOY, current account deposits grew 5% YOY and 1% QOQ. The share of CASA deposits in total deposits stood at 42%.
On the slower QOQ deposit growth, the bank said the limit is not specific to Axis Bank “The current liquidity environment is a limiting factor for deposit growth for the banking system of which we are a significant part,” the bank said.
Net interest margin (NIM) for Q3FY24 stood at 4.01%, down from 4.26% in Q3FY23, due to impact of interest rate reversal and spread. The bank’s cost of funds rose to 5.35% more than 3.77% a year ago.
The bank’s advances grew 22% YOY and 4% QOQ to ₹ 9.32 lakh crore as on December 31, 2023. Within the total advances, retail loans grew 27% YOY and 5% QOQ and accounted for 59% of the net advances The share of secured retail loans was approximately 75%, with home loans comprising 30% of the retail book. Home loans grew 10% YOY, Personal loans grew 28% YOY, Credit card advances grew 92% YOY.
On AIF investments, the bank said they have ₹208 crore, of which 46% are either directly or indirectly funded by government entities. The bank took full care of the AIF
Asset quality showed improvement with the bank’s reported Gross NPA and Net NPA being 1.58% and 0.36%, respectively, against 1.73% and 0.36% as on September 30, 2023. Gross slippages during the quarter were ₹ 3,715 crore, compared to ₹ 3,254. crore in Q2FY24 and ₹ 3,807 crore in Q3FY23.
“The conversations about India are strong and it is seen as a major investment destination, evident in discussions at global platforms like the World Economic Forum,” said Amitabh Chaudhry, MD & CEO of Axis Bank. “The Indian economic momentum was strong in FY24, and we believe the trend will continue well into FY25.”
During the quarter, there was a negative impact of regulatory changes on CET-1 of 70 bps and as a result the Capital Adequacy Ratio (CAR) and CET1 ratio including profit for nine months were 16.63% and 13.71% respectively.
“Deposit growth outpaced loan growth, but mainly driven by wholesale term deposits up to 21% QOQ, which is a key negative,” said Rahul Malani, Deputy VP Fundamental Research, Banking and NBFC Analyst, Sharekhan at BNP Paribas. “Retail term deposits grew by 2% QOQ and CASA was flat.”
Shares of the bank closed 2.84% down at Rs 1,088.9 on BSE as the benchmark index fell 1.47%.