Axis Bank Q1FY19 result: Lender's core operating profit grew 23% to Rs 4,269 cr

Axis Bank Q1FY19 result: Retail business momentum remains healthy for the bank as CASA deposits on a cumulative daily average balance (CDAB) basis grew 15% YOY and constituted 46% of total deposits. Saving deposits on a CDAB basis grew 18%.

The Bank’s Net Interest Income (NII) grew by 12% YOY to Rs 5,167 crores during Q1FY19 from Rs 4,616 crores in Q1FY18. Net interest margin for Q1FY19 stood at 3.46%. Image source: Reuters

Axis Bank Limited today reported that its core operating profit for Q1FY19 grew by 23% YOY to Rs 4,269 crores for June quarter from Rs 3,467 crores in Q1FY18. The bank's net profit for Q1FY19 stood at Rs 701 crores compared to a loss reported in Q4FY18; on a YOY basis, it contracted by 46%.

The Bank’s Net Interest Income (NII) grew by 12% YOY to Rs 5,167 crores during Q1FY19 from Rs 4,616 crores in Q1FY18. Net interest margin for Q1FY19 stood at 3.46%.

The highlights of the bank's result are:

1. Improved financial performance driven by higher NII, lower expenses and provisions QOQ:

- PAT for Q1FY19 stood at Rs 701 crores compared to a loss reported in Q4FY18.
-Core operating profit was up 23% YOY and 24% QOQ
- Net Interest Income for Q1FY19 was Rs 5,167 crores, grew 12% YOY and 9% QOQ
- NIM for Q1FY19 was 3.46%.
- Operating expenses for Q1FY19 grew 12% YOY and declined 3% QOQ
- Total provisions stood at Rs 3,338 crores down 54% QOQ.
- The Bank has recognized the entire Rs 135 crores of MTM provisions on AFS and HFT investments incurred in Q1 in this quarter.

2. Elevated NPA recognition phase of this cycle is nearly complete

-Q1FY19 slippages declined 74% QOQ to Rs 4,337 crores
-The Bank’s GNPA and NNPA stood at 6.52% and 3.09%, down from 6.77% and 3.40% QOQ
-The Bank has increased Provision Coverage Ratio to 69% from 65% in Q4
- 88% of corporate slippages in Q1 came from previously disclosed BB & Below book.
- After this quarter’s downgrades into BB & Below, the Bank believes the rating downgrade cycle is now normalized. BB & Below pool stood at 2.1% of gross customer assets. This was 7.3% at peak.

3. Loan growth during the quarter stood at 14% YOY driven by Retail and SME segments:

-Retail, SME and Corporate loan book grew 21%, 19% and 6% YOY respectively
-Retail and SME loans constituted 61% of total loans
-78% of outstanding Corporate exposure is rated ‘A’ or better

4. Retail business momentum remains healthy:

-CASA deposits on a cumulative daily average balance (CDAB) basis grew 15% YOY and constituted 46% of total deposits. Saving deposits on a CDAB basis grew 18%.
-Retail Advances accounted for 48% of Net Advances; Retail Fee Income grew 18% and constituted 61% of Total Fee Income.

5 Among the top players in the digital space:

-Ranked #1 in Mobile Banking spends as per RBI data
-Market share in UPI transactions stood at 10% for Q1FY19
-Mobile banking spends grew 90% YOY, Credit Card spends grew 51% YOY

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6-The Bank’s Capital Adequacy Ratio (CAR) improved during the quarter. Under Basel III, Total & Tier I CAR (including net profit for Q1FY19) stood at 16.71% and 13.22%, respectively, up 14 bps QOQ.

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