Axis posts loss of ₹112 crore in Q2 on one-time charge
MUMBAI: Axis Bank Ltd incurred a loss of ₹112 crore for the quarter ended September 30, due to a onetime hit of ₹2,138 crore as the value of future relief through deferred tax assets (DTA) will fall because of the corporate tax rate cut. Adjusted for this extraordinary item, net profit would have surged 156% to ₹2,026 crore from ₹789.61 crore a year earlier.
Axis Bank said it has been fully adjusted through Q2FY20 financials, which has impacted the earnings significantly.
“The hit that we have taken is because of restatement of DTA. With tax rates reduced, the entire DTA has to be restated at 25% instead of 35%,” said Jairam Sridharan, group executive and chief financial officer, Axis Bank.
Asset quality improved as the bank wrote off ₹3,104 crore in the second quarter of FY20. Gross non-performing assets as a percentage of total assets stood at 5.03% in the September quarter compared with 5.25% in the June quarter. The bank added fresh bad loans worth ₹4,983 crore in the second quarter compared to ₹4,798 crore in the previous quarter. Corporate slippages stood at ₹2,862 crore—97% of this came from previously disclosed clients with ratings of BB and below.
In a post-earnings press meet, Axis Bank’s managing director and chief executive officer Amitabh Chaudhry said while momentum is picking up in car and vehicle loans, the bank is “cautious” in chasing growth opportunities in the small and medium enterprises (SMES) segment.
“Some of the assets in our stock of BB and below rating have been there for a long period of time. In a deteriorating economic environment, you will see some of this stock go into slippages. So, yes, our slippages will remain at elevated levels if economic conditions don’t improve,” he added.
Sridharan said cash flows of SMES were being stretched because of delayed payments from large companies. He also said the bank is seeing stress in its agricultural loan portfolio.
Operationally, the bank’s performance improved with net interest income growing 17% year-on-year to ₹6,102 crore.
Net interest margins stood at 3.51% at the end of September quarter. Its loan book saw a growth of 19% with the retail loan book growing at 23% year-onyear.
Separately, RBL Bank reported 73% year-on-year decline in net profit because of a sharp increase in provisions and bad loans. Profit during the quarter plunged to ₹54.31 crore from ₹204.54 crore a year earlier.
Asset quality deteriorated sharply in the September quarter with gross non-performing assets as a percentage of gross advances rising sequentially from 1.385% to 2.6% in the three months ended September 30, and net NPAS climbing from 0.56% to 1.56%.