By Nishit Navin and Siddhi Nayak
BENGALURU (Reuters) -India’s Axis Bank reported a smaller-than-expected rise in quarterly profit on Thursday, as loan growth slowed and it set aside more funds against potential bad loans.
The country’s fourth-largest private lender by market capitalisation said its standalone net profit – which excludes earnings of its subsidiaries – rose 4% to 63.04 billion rupees ($728.48 million) for three months to December-end.
Analysts had expected, on average, a profit of 65.16 billion rupees, according to estimates compiled by LSEG.
Indian lenders have been grappling with higher bad loans in segments such as microfinance and in the unsecured portfolio, forcing them to set aside more funds for potential losses.
Axis Bank’s provisions and contingencies, or funds kept aside for potential bad loans, more than doubled to 21.56 billion rupees year-on-year.
The bank made provisions “largely towards unsecured retail portfolio that has slipped in the current market environment,” Chief Financial Officer Puneet Sharma said in a conference call.
Its gross non-performing asset ratio, a key gauge of lenders’ asset quality, was at 1.46% at December-end compared with 1.44% three months earlier.
The bank has deliberately calibrated loan growth given the stress in certain segments, executive director Subrat Mohanty said on the same call.
Axis Bank’s loans grew 9% year-on-year in the three months to December-end, slower than the 11% rise in the previous quarter. Its total deposits also grew by 9%.
Net interest income – the difference between interest earned and paid – rose 9% to 136.06 billion rupees, lagging analysts’ expectations of 137.87 billion rupees, per data compiled by LSEG.
Indian lenders’ deposit growth has been slower than the rise in advances, forcing them to either ease loan growth or raise more deposits.
The net interest margin, a key gauge of profitability, shrank to 3.93% from 4.01% a year earlier, and 3.99% in the previous quarter.
The bank aims to operate at a net interest margin of 3.80% in the medium term, Sharma said.
($1 = 86.5350 Indian rupees)
(Reporting by Nishit Navin; Editing by Mrigank Dhaniwala and Janane Venkatraman)
