Axis Bank managing director and CEO Amitabh Chaudhry on Thursday said that banks are facing challenges on the deposit growth and asset quality front even as the country’s third-largest private lender reported a year-on-year growth of 18% in net profit to Rs 6,918 crore for the September quarter. 

“Current conditions present variables which are tough. We say we have excess liquidity but on the other side, deposit rates are not coming down. We also have clear guidelines on what credit-to-deposit ratio we can have. We are seeing some asset quality worsening in unsecured loans and some other asset classes. Further, interest rates being demanded by good borrowers are also not increasing. In such an environment, to be able to report steady NIMs and better asset quality puts us in a different light,” Chaudhry said.

During the September quarter, retail loan slippages and loan provisions stood elevated while deposit growth continued to be led by term deposits.

Provisions nearly trebled to Rs 2,204 crore in the quarter ended September 2024, from Rs 815 crore a year ago. Sequentially, loan loss provisions fell to Rs 1,441 crore from Rs 2,551 crore a quarter ago.

Provision coverage stood at 77% compared with 79% a year ago and 78% a quarter ago.

Fresh slippages rose to Rs 4,443 crore from Rs 3,254 crore in the year-ago quarter. The retail loan segment accounted for Rs 4,073 crore while Rs 264 crore came from commercial banking loans and Rs 106 crore from wholesale loans.

In an earnings call, Axis Bank chief financial officer Puneet Sharma said that incrementally bulk of the retail slippages have been from unsecured loans. Even so, 71% of the bank’s retail portfolio is secured. Overall, gross slippage ratio eased to 1.76% from 1.97% in the June quarter and the net slippage ratio to 0.96% from 1.37%.

NII and margins

Net interest income (NII) grew 9% year-on-year to Rs 13,483 crore. Sequentially, NII grew by just 0.3%. 

Net interest margin (NIM) for the September quarter fell to 3.99% from 4.11% a year ago.

NPAs

The private lender’s gross non-performing asset (NPA) ratio improved to 1.44% as of 30 September 2024, from 1.73% a year ago and 1.54% a quarter ago. 

Net NPA ratio declined marginally to 0.34% from 0.36% a year ago.

Loan growth 

The bank's total loan book grew 11% year-on-year and 2% sequentially to Rs 10 lakh crore as on 30 September. The retail segment grew 15% to Rs 5.98 lakh crore, accounting for 60% of net advances.

In terms of segmental year-on-year growth, home loans rose 5%, personal loans by 23% and credit card advances by 22%.

Loans to the SME segment rose 16% to Rs 1.1 lakh crore while the corporate segment remained moderate with a 3% growth.

Deposit growth

Total deposits grew 14% year-on-year to Rs 10.87 lakh crore. Within this, term deposits rose 21% from last year to Rs 6.24 lakh crore, current account deposits increased 8% to Rs 1.43 lakh crore and savings account deposits grew 2% to Rs 2.99 lakh crore.

CASA (current account savings account)  deposits grew to Rs 4.41 lakh crore from Rs 4.24 lakh crore. 

The share of low-cost CASA deposits was at 40.6%, down from 43% a year ago.

Axis Bank issued 1.06 million new credit cards in the second quarter of FY25. It was the fourth largest issuer of credit cards during the quarter.