Axis Bank A Mixed Performance

India’s third largest private sector bank, Axis Bank, posted a 19% increase in its net profit on a yearly basis for the quarter ended December 2013. Its net profit stood at Rs 1604.11 crore, primarily helped by a sharp cut in Provisions & Contingencies which were down 48% on a yearly basis. On a sequential basis too, net profit increased by 18% due to a fall in provisions by 71%.

Net interest income (NII) of the bank for the quarter increased by 19.6% on a yearly basis and stood at Rs 2984 crore, which was lower than what the market was expecting. Other income which formed 17% of the total income stood at Rs 1644.42 crore for the recently concluded quarter saw a very anaemic growth just about 1.8% on a yearly basis and declined of 7% on a quarterly basis. 

Like many other banks, Axis Bank, too saw its asset quality deteriorating. In absolute terms gross non-performing assets (NPAs) and net NPAs have increased by 10% and 19% on a sequential basis to Rs 3008 and Rs 1000 crore respectively. In proportion to their gross advances for Q3FY14, gross NPAs and net NPAs stood at 1.25% and 0.42% respectively and are higher on both yearly and sequential basis. Net Interest margin of the bank has declined by eight basis points to 3.71% for Q3FY14. 

Shares of Axis Bank are currently trading at price to book value of 1.6x, which looks attractive. However, looking at the deteriorating asset quality and subdued increase in total income, we advise readers to stay away from the stock as of now.