Axis Bank Q1 Profit Hit By Bad Loan Surge

Axis Bank on Friday reported a surge in bad loans in its first quarter that pushed net profit down by a fifth but the bank said the growth in problem loans was in line with its expectations.

Most Indian lenders have reported an increase in troubled loans this year following an asset quality review ordered by the central bank as part of a broader clean-up of the country's banking sector.

Axis Bank, the country's third-biggest private sector lender by assets, said net profit fell 21 percent from a year earlier to Rs 1,556 crore for the three months to June 30, missing analysts' estimate of Rs 1,998 crore.

Its bad loans rose by Rs 3,638 crore during the quarter, taking its gross bad loans to Rs 9,553 crore, or 2.54 per cent of its total loans as of end-June, compared with 1.67 percent at the end of March.

"We are not unduly perturbed," the bank's finance chief Jairam Sridharan told reporters on a conference call. He said the rise in bad loans was in line with the bank's previous guidance of potential trouble.

The bank said it expected to keep credit costs in a previously guided range of 125 to 150 basis points. Credit costs reflect how much a bank has to set aside in provisions for potential loan losses.

In April, Axis Bank had said it had prepared "watch list" of about Rs 22,600 crore worth of loans, or 4 percent of its assets, that could potentially become troubled.

It had guided for 60 percent of those loans to turn sour over the next eight quarters. Sridharan said on Friday they maintained that view.

That watch list reduced to about Rs 20,300 crore as of end June, Axis Bank said, adding 92 percent of the corporate loans that turned sour in the June quarter were from that list.

"It is playing out to the script," Sridharan said.

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