Axis Bank Expects More Bad Loans In 2016-17 As Q4 Profit Falls

Mumbai: Axis Bank Ltd, India's third-biggest private sector lender by assets, said it expected bad loans to rise in the current financial year and credit costs to be sharply higher, after reporting a fall in fourth quarter profit.

Indian banks' bad loans have surged in the past six months after an asset quality review ordered by the Reserve Bank of India as part of a clean-up exercise.

Mumbai-based Axis Bank expects more bad loans in the financial year that began in April, its finance chief Jairam Sridharan said, although he expected "some remission" towards the end of the year.

The bank's credit cost could increase to 125 basis points in 2016-17 financial year from 111 basis points in the last financial year, Mr Sridharan said, adding that in the worst case, credit cost for the current financial year could be as high as 150 basis points.

"Our outlook with respect to asset quality... continues to remain cautious," he said on a conference call.

Axis Bank has prepared a "watch list" of about Rs 22,600 crore worth of loans, or 4 per cent of its assets, that could potentially become troubled, the bank said separately in an investor presentation.

It expects 60 per cent of those loan accounts to become bad loans over the next eight quarters, the bank said.

Axis Bank's net profit fell 1.2 per cent from a year earlier to Rs 2,154 crore ($324 million) for its fiscal fourth quarter to March 31, missing analysts' estimates of Rs 2,419 crore.

The bank added Rs 1,474 crore in new bad loans in the fourth quarter, although gross bad loans as a percentage of total loans were little changed from the previous three months at 1.67 per cent.

IDFC Bank, one of India's two newest banks, on Tuesday reported net profit of Rs 165 crore for the three months to March. Its gross bad loans ratio widened to 6.16 per cent from 3.09 per cent in the December quarter.

($1 = Rs 66.4295)