Private lender Axis Bank's first-quarter earnings missed estimates due to elevated slippages, decreased net interest margin and deteriorating asset quality.

The lender reported its first-quarter earnings of the financial year 2022 in the last week of July. While its net profit rose 94 percent to Rs 2,160 crore for Q1 FY22, the CNBC-TV18 poll had predicted a profit of Rs 2,575 crore. Its gross slippages stood at Rs 6,518 crore compared to Rs 5,285 crore during Q4FY21 and Rs 2,218 crore in Q1FY21.

Consequently, there were net slippages in NPAs (before write-offs) for the quarter of Rs 3,976 crore as compared to Rs 1,822 crore in Q4FY21 and net slippages of Rs 1,610 crore in Q1FY21. Net slippages in NPAs (before write-offs) for Retail and SME loans stood at Rs 3,741 crore and Rs 84 crore respectively.

Amitabh Chaudhry, MD, and CEO, Axis Bank said, in the months and the quarters to come, the credit cost should be lower. “Credit cost in this year will be lower than that of last year,” he said.

“The demand resolution for the retail portfolio was 98 percent for Q1FY22. It reached close to 99.5 percent of March 2021 levels in June and July is back to pre-COVID levels across all our asset classes. We are seeing much better collections than what we had seen in the first three months of the quarter, including in June which was a way better month than May,” he said.

He believes the bank will recover in Q2FY22 assuming the third wave of COVID-19 or slowdown due to other reasons do not kick in.

“We are being conservative, we believe it is important to be conservative during these times, keep your balance sheet extremely strong, beef it up as much as possible. As things recover, because a lot of the slippages are secured, the money and the recovery should come back quite quickly,” he shared.

On the current account issue, he mentioned, “Reserve Bank of India (RBI) has come out with a circular sometime back and banks were given sufficient time to ensure that they can look at their data based on all the current account and take appropriate action. What does tend to happen—because it was a large exercise—is some activity tends to get bunched towards the end. As a result, a lot of customers are facing some inconvenience. If they had acted in advance, they would not have gone through this particular problem.” Hopefully, this problem should get sorted out in the short order, he added.

According to him, overall the large private banks won’t gain or lose much. However, the foreign banks could be a bit of a loser because they do not have the kind of requisite limits to be managing cash.

“Will the public sector banks will gain? Yes, in some cases they could. But at the end of the day, it is very important that as cash is king, people manage cash. They want to reduce overall borrowing, and institutions and companies will continue to look for solutions that allow them to manage cash more seamlessly and efficiently. Obviously, banks will continue to look for opportunities to gain the business of this nature," he said.

For the full interview, watch the accompanying video.

(Edited by : Yashi Gupta)

First Published:Aug 3, 2021 1:43 PM IST