Axis Bank Ltd Research ReportQ3FY21

Balance sheet strength to curb earnings volatility… For Q3FY21, Axis Bank posted a mixed set of results on the operating front as profits were slightly below our estimates owing to higher opex and provisions. Asset quality saw a small blip but the bank has sufficient provisions to absorb any shock and smoothen earnings. NII for the bank was up 14.3% YoY at | 7373 crore, a slightly slower trajectory than past few quarters. This was account of modest credit growth and interest reversal. Margins were steady at 3.59%. Excluding interest reversal, the same would have been at 3.89%. Other income was flattish at | 3776 crore, owing to tepid fee income growth (5% YoY) and 29% YoY decline in treasury income. Operating expenses for the quarter were up 19.3% YoY mainly due to increments in salary and, thus, gratuity adjustments. Provisions were at | 4604 crore (up 32.7% YoY) of which | 3899 crore was towards proforma NPA. As a result of higher provisions and opex, PAT for Q3FY21 was down 36.4% YoY to | 1117 crore. Asset quality performance was slightly weak though headline NPA numbers showed improvement, due to Supreme Court order. Proforma NPA increased sequentially reflecting true picture with proforma GNPA and NNPA increasing 27 bps and 16 bps QoQ to 4.55% & 1.19%, respectively. This was despite a higher write-off of | 4242 crore. Also, ~84% of proforma slippages came from retail book. Restructured book was at | 2709 crore (0.45% of loans).