During the December quarter, Axis Bank's net interest income grew 17% to Rs2,495 crore, while fee income jumped 15% to Rs1,405 crore driven by a 35% spike in fee income from the retail business

Mumbai: Axis Bank, the country’s third largest private sector lender has reported 22% rise in net profit to Rs1,347 crore on retail advances, which jumped 45%, as well as bigger other income during the October-December quarter, reports PTI.

“Going forward, our focus on the retail sector will gather more momentum as we want to take the contribution of the retail book in our overall assets to 30%,” Somnath Sengupta, executive director, corporate centre, at Axis Bank told reporters on an earnings conference call.

He also sounded bullish on the overall advances growth this fiscal saying the bank will close the year above the trend growth rate.

The bank’s net interest income grew 17% to Rs2,495 crore, while the fee income jumped 15% to Rs1,405 crore driven by a 35% spike in fee income from the retail business. Income from trading activities chipped in with Rs159 crore during the quarter, Sengupta said, adding that Rs180 crore recovery and uprgrades also helped in posting better earnings.

Total income of the bank increased to Rs8,580.30 crore during the December quarter, from Rs7,206.77 crore in the year-ago period.

For the first nine months of 2012-13 fiscal, the bank clocked 22% rise in the net profit, to Rs3,624.28 crore, from Rs2,964.94 crore in the same period of the previous fiscal.

The Shikha Sharma-headed bank reported a total income of Rs24,678.96 crore in the first three quarters, compared to Rs19,766.93 crore in the same period last financial year.

Terming the numbers as “healthy in a challenging environment”, Sengupta said the bank hopes to maintain the margins at 3.50% or above. In the reporting quarter, the bank’s NIM stood at 3.57%, a tad down from a year ago when it stood at 3.77%, but a notch higher from the second quarter when it stood at 3.47%.

Banking analyst at Kotak Securities Saday Sinha said the earnings came “slightly ahead of our expectations”, especially the net interest income which surprised positively on back of better than expected NIM (11 bps QoQ improvement, while net profit growth was further aided by lower provisions.

“Although business growth witnessed marginal moderation QoQ, it was better than the overall systemic growth. Asset quality also remained stable while addition to restructured portfolio came more or less similar to previous quarter,” Sinha said.

However, Motilal Oswal Securities VP-markets strategy and equities, Rikesh Parikh said Axis Bank's numbers are in line with estimate. Higher other income, lower operating expenses and provisions contributed to higher net, which was 6% than estimated.

On the incremental advances during the quarter, he said mortgages/home loans contributed 70% of the massive 45% spike in retail advances, followed by 11% each by auto and personal loans, Sengupta said.

The bank, in which the government holds nearly 24%, saw deposits growing 17% to Rs2,44,501 crore on the back of a healthy 13% rise in low-cost CASA book to Rs97,757 crore - 40% of its total liabilities.

Sengupta said CASA growth was driven by 22% or Rs57,521 crore rise in the savings deposits and a 30% in retail term deposits.

During the quarter, other income rose 13% to Rs1,615 crore, driven by growth in fee income which stood at Rs1,405 crore—up 15%.

The retail growth helped the bank report flat growth in the net bad loan book which stood unchanged at 0.33% and the gross NPAs also remained unchanged at 1.10%.

The bank’s provisions coverage ratio rose over 81% in the quarter, up from 75% a year ago and 80% in the second quarter.

During the quarter, the bank set aside Rs383 crore for bad loans, which remained stagnant a year ago, but down 22% sequentially from the previous quarter as the bank could get a write back on provision depreciation worth Rs33 crore during the quarter.

Sengupta said this is despite the fact that the bank had restructured loans worth Rs368 crore during the quarter, taking its overall recast loan book to Rs1,320 crore.

Stable asset quality also helped Axis post a healthy capital adequacy ratio which, including the net profit for the first nine months stood at 15.17%, with the core Tier-I capital ratio being at 10.27%.

When asked about possible slippages in Q4, he said slippages are unlikely to rise in the final quarter and also said there is no rising threat to asset quality form the SME sector, which most of the banks blame for their rising bad loan book.

When asked about status of the arbitration process to recover the $260 million it had advanced to the GMR Group for its Male airport project, which last month was taken over by the Maldives government, Sengupta did not offer a comment saying client specifics cannot be discussed.

He said, however, the bank had made provisions for its exposure to the troubled media company Deccan Chronicle group, but did not specify how much or in what percentage.