Mumbai: Axis Bank Wednesday reported an 18 percent increase in the March quarter net profit at Rs 2,181 crore, driven by a jump in core income on the back of a 22 percent spike in advances.
But the third-largest private lender warned that troubles on the asset quality front are far from over.
The Shikha Sharma-led bank reported a net interest income of Rs 3,799 crore, up 20 percent, while the other income fared better with a 21.41 percent growth at Rs 2,687 crore, which flowed from a 27 percent jump in trading profit and 19 percent increase in fee income.
For the full fiscal, the city-based lender registered a credit growth of 22 percent backed up by retail, which was up 27 percent on solid showing in mortgaged and unsecured product lines, while corporate lending went up 20 percent.
For FY16, it's targeting advances' growth to moderate to 18-20 percent, with retail growth at 25 percent and corporate banking growth at 17 percent.
Total income of the bank rose to Rs 9,697 crore during the quarter from the earlier Rs 7,965 crore.
On the asset quality front, Executive Director and Head of Corporate Banking V Srinivasan said FY16 will be "challenging" as the bank expects an increase in credit cost, or a percentage of provisioning, to 0.80 percent from 0.75 percent in FY15.
However, the bank is expecting fresh accretion to bad assets to be lower in the current year.
The bank has managed to do better on the Rs 6,500 crore guidance for fresh bad assets addition in FY15.
In the reporting quarter, the bank witnessed slippages of Rs 610 crore, including Rs 150 crore from already restructured loans.
Srinivasan said the next two quarters will continue to be challenging with stress emanating from sectors like gems and jewellery, construction and infrastructure.
For the reporting quarter, the bank restructured Rs 1,540 crore of its advances and has a pipeline of another Rs 500 crore from up to three accounts, Srinivasan said.
There was an increase in provisions to Rs 709.82 crore as against Rs 505.23 crore, Chief Financial Officer S K Gupta said, attributing it to a Rs 133-crore hit from provisions on unhedged currency exposures of clients after a rule change by the Reserve Bank.
A base rate cut in October hit the bank's net interest margin, which slipped to 3.81 percent from 3.89 percent in the year-ago period, Gupta said, adding in the medium term, it will narrow further to 3.50 percent.
Axis Bank, joining its larger peers, had cut its base rate 0.20 percent earlier this month.
The share of the low-cost current and savings account deposits stood constant at 45 percent, but there was an increase in the average over the period.
Agriculture was a major contributor to the advances' growth and the bank is monitoring the situation of rural distress after the unseasonal rains and expectations of lower rainfall this year.
The overall capital adequacy stood at 15.09 percent and the bank is not looking at a fresh capital raising exercise, Gupta said, adding that it may raise over Rs 4,500 crore from long-term bonds for the infrastructure sector.
The number of employees in the core retail banking franchise has de-grown in FY15, it said, without giving a number, but Gupta pointed out that this was on the back of an improvement in productivity.
The scrip closed 3.30 percent higher at Rs 552.90 on BSE on Wednesday, as against 0.62 percent correction in the Sensex.
