- Core Operating Profit: Up 16% year-on-year and 1% quarter-on-quarter.
- CASA Ratio: Amongst the best for peer private banks.
- Focused Business Segment Growth: 24% year-on-year and 1% quarter-on-quarter.
- CET-1 Ratio: 14.06%, net accretion of 32 basis points in the quarter.
- Deposit Growth: 13% year-on-year.
- Savings Account Balances: Up 3% sequentially.
- Current Account Balances: Up 2% sequentially.
- Term Deposits: Up 4% sequentially.
- Retail SA NTB Deposits: Up 20% year-on-year.
- New Corporate Salary Levels: Acquired in Q1 grew 39% quarter-on-quarter.
- Net Interest Margin (NIM): 4.05%, flat sequentially.
- Net Interest Income: INR13,448 crores, 12% year-on-year growth, 3% quarter-on-quarter growth.
- Fee Income: INR5,204 crores, 16% year-on-year growth.
- Operating Expenses: INR9,125 crores, 11% year-on-year growth, 2% sequential decline.
- Cost to Assets: 2.54%, declining 1 basis point sequentially.
- Net Credit Cost: 0.97%, up 47 basis points year-on-year.
- PAT: INR6,035 crores, 4% year-on-year increase.
- GNPA: 1.54%, declined 42 basis points year-on-year.
- Net NPA: 0.34%, declined 7 basis points year-on-year.
- PCR: 78%, flat sequentially.
- Consolidated ROA: 1.70% annualized.
- Consolidated ROE: 16.68% annualized.
- Subsidiaries' Net Profit: INR436 crores, 47% year-on-year growth.
- Axis Finance PAT: INR154 crores, 26% year-on-year growth.
- Axis AMC AUM: INR2,91,967 crores, 18% year-on-year growth.
- Axis Securities Revenue: INR426 crores, 118% year-on-year growth.
- Axis Securities PAT: INR121 crores, 171% year-on-year growth.
- Axis Capital PAT: INR49 crores, 220% year-on-year growth.
- Gross Slippages: INR4,793 crores.
- Net Slippages: INR3,290 crores, 95% year-on-year increase.
- Recoveries from Written Off Accounts: INR591 crores.
- Average LCR Ratio: 120%.
Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Core operating profit increased by 16% year-on-year and 1% quarter-on-quarter, driven by healthy operating income growth and moderation in operating expense growth.
- The bank's CASA ratio and free to average assets continue to be among the best for peer private banks.
- Axis Bank Ltd (FRA:UZC, Financial) successfully completed the integration of Citibank's consumer business ahead of schedule, ensuring a smooth transition for 2.1 million customers.
- Retail Savings Account (SA) New-to-Bank (NTB) deposits grew by 20% year-on-year, with new accounts opened up by 8% year-on-year and balances per account up by 11% year-on-year.
- The bank's proprietary digital capabilities, such as 'open by Axis Bank,' continue to be recognized as top-rated mobile banking apps globally, with a rating of 4.8.
Negative Points
- Net credit cost increased to 0.97%, up 47 basis points year-on-year, impacted by timing differences and lower recoveries and upgrades in the corporate loan portfolio.
- Gross slippage ratios in retail and CBG have declined year-on-year, but the wholesale segment saw an increase in gross slippages due to small value accounts.
- Operating expenses for the quarter were INR9,125 crores, growing 11% year-on-year, with technology and digital spends increasing by 39% year-on-year.
- The bank's loan growth was primarily driven by the corporate segment, while retail and SME segments remained virtually flat sequentially.
- The bank's RWA density increased by 300 basis points due to operational risk true-up and changes in the balance sheet mix, impacting the overall risk-weighted assets.
Q & A Highlights
Q: Can you explain the increase in slippages this quarter and whether this is an industry trend?
A: The increase in slippages is primarily due to lower recoveries and upgrades in the corporate loan portfolio, which are episodic in nature. We expect recoveries to happen, but the timing can vary between quarters. There is also a general increase in credit costs across the retail unsecured portfolios, but they have not reached our internal risk benchmarks yet. (Puneet Sharma, CFO)
Q: What is the outlook for Net Interest Margin (NIM) for the remainder of the year?
A: We do not provide specific guidance on margins for the short term. Our structural guidance is 3.80% on a through-cycle basis. We have been operating at a 25 basis points cushion above this through-cycle margin for a couple of quarters and will make efforts to retain as much of the margin as possible. (Puneet Sharma, CFO)
Q: Can you provide more details on the increase in WNB (Watch, Non-Performing, and Below) loans?
A: The increase in WNB loans is due to the investment circular requiring us to mark-to-market investments, which resulted in a positive mark-to-market impact. Additionally, unrated equity investments fall under WNB below. The increase is not indicative of a deterioration in wholesale asset quality. (Puneet Sharma, CFO)
Q: What is the strategy behind the loan book growth, particularly the increase in corporate loans?
A: We are seeing reasonable opportunities on the corporate side and are happy to take them on as long as they meet our underwriting and pricing standards. The growth is broad-based and includes current account and transaction banking opportunities, making it reasonably profitable. (Rajiv Anand, Deputy MD)
Q: How do you view the trade-off between margins and loan growth or deposit growth?
A: We operate to grow profitably, focusing on risk-adjusted return on capital (RAROC). Deposit growth will constrain advances growth, but we will not compromise profitability for higher growth. We aim to grow 300-400 basis points faster than the industry over the medium to long term. (Puneet Sharma, CFO)
Q: What is the impact of the Citibank Consumer business integration on your metrics?
A: The integration has met or exceeded our expectations on every metric, including retention of balances, customers, and employees. We have also derived significant synergistic benefits by applying best practices from the Citibank portfolio to our larger portfolio. (Amitabh Chaudhry, CEO)
Q: How do you plan to manage the cost-to-assets ratio in the coming quarters?
A: We will continue to invest in the franchise while tightening our belts where necessary. You will see a moderation in the growth of expenses through fiscal '25. (Puneet Sharma, CFO)
Q: Can you provide a breakdown of term deposits between retail and bulk?
A: We do not disclose the RTD (Retail Term Deposits) and NRTD (Non-Retail Term Deposits) breakup. However, the LCR (Liquidity Coverage Ratio) plus proportion of retail term deposits is 57% for Q1 FY25. (Puneet Sharma, CFO)
Q: What are the trends in retail gross slippages, particularly in the unsecured segment?
A: We have seen a slight increase in unsecured slippages across the industry, primarily driven by high leverage and loan stacking. However, our early risk indicators are within guardrails, and we have been taking proactive risk actions for the past six to nine months. (Amit Talgeri, Chief Risk Officer)
Q: What is the outlook for transaction banking fees?
A: Transaction banking fees are increasingly becoming a technology play. We have made significant investments in this space, including Project Neo and Neo for Business, to provide state-of-the-art solutions to our clients. These investments are expected to improve our transaction banking fees. (Rajiv Anand, Deputy MD)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
