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Axis bank – A review of year 2009

The bank’s loan disbursement grew by 18% year-on-year, from Rs.68,853 crores as on 30th Sep’08 to Rs.81,044 crores as on 30th Sep’09, while investments rose to Rs.52,072 crores from Rs.37,998 crores, over the same period, a growth of 37% year-on-year . The net interest income rose to Rs.1,150 crores during quarter ending September 2009 from Rs.913 crores during quarter ending September 2008, a growth of 26% year-on-year .

Axis Bank, previously called UTI Bank, was promoted jointly by the Administrator of the Specified Undertaking of the Unit Trust of India (UTI-I), Life Insurance Corporation of India (LIC), General Insurance Corporation Ltd., National Insurance Company Ltd., The New India Assurance Company, The Oriental Insurance Corporation and United Insurance Company Ltd.

The bank changed its name to Axis Bank in April 2007 to avoid confusion with other unrelated entities with similar name. Axis Bank is one of the Big Four Banks of India with State Bank of India, ICICI Bank and HDFC Bank. At the end of October 2009, the Bank had a very wide network of more than 925 Branch offices and Extension Counters. The Bank has a network of over 3900 ATM’s (as on 31st October 2009)

The Bank today is capitalized to the extent of Rs. 401.95 crores with the public holding (other than promoters) at 53.23%. The shares of Axis Bank are listed at the NSE and BSE. The GDRs issued by the Bank are listed on London Stock Exchange.

2009 – Financial Update for AXIS Bank

Net Profit in the quarter ended September 2009 rose to Rs. 531.64 crores from Rs. 402.91 crores in the same period in 2008, registering a growth of 31.95% year-on-year. Net Profit for half year ending on September 2009 stood at Rs. 1,093.68 crores, up by 49.20% year-on-year from Rs. 733.05 crores for the comparable period in 2008.

The overall asset managed grew by 18.72% year-on-year from Rs. 1,27,786 crores as at the end of September 2008 to Rs. 1,51,714 crores as at the end of September 2009.

Demand deposits on a daily average basis grew by 27.69% year-on-year to Rs 42,554 crores during quarter ending September 2009 from Rs 33,326 crores during quarter ending September 2008, with savings bank deposits growing by 32.92% year-on-year.
Earnings of the Bank – Interest Income

Axis bank posted a net interest margin of 3.52% during quarter ending September 2009, higher than the net interest margin of 3.34% during quarter ending September 2008.

The bank’s loan disbursement grew by 18% year-on-year, from Rs.68,853 crores as on 30th Sep’08 to Rs.81,044 crores as on 30th Sep’09, while investments rose to Rs.52,072 crores from Rs.37,998 crores, over the same period, a growth of 37% year-on-year . The net interest income rose to Rs.1,150 crores during quarter ending September 2009 from Rs.913 crores during quarter ending September 2008, a growth of 26% year-on-year .

Value Added Fee income

Fee income registered a growth of 15% year-on-year, rising to Rs.719 crores during quarter ending September 2009 compared to Rs.627 crores in quarter ending September 2008, with contributions from all major businesses in the bank.

Fee income from Large and Mid Corporate Credit grew 50% year-on-year , followed by that from Treasury (35% year-on-year), Business Banking (22% year-on-year), SME and Agri lending businesses (16% year-on-year) and Retail Business (10% year-on-year).

Compared to Rs. 1,164 crores during half year ending September 2008, fee income during half year ending September 2009 stood at Rs. 1,346 crores, up by 16% year-on-year.

Treasury Trading Income

Axis Bank generated Rs.224 crores of trading profits during quarter ending September 2009, as compared to Rs.36 crores in quarter ending September 2008, a robust growth of 519% year-on-year. The share of trading profits to operating revenue increased from 2% in quarter ending September 2008 to 10% in quarter ending September 2009.

Loans Portfolio – NPAs and Restructured loans

The non-performing assets (NPAs) of Axis bank increased during this year. This indicated that the third largest private sector bank has not followed the leaders like ICICI bank and HDFC bank in reducing the disbursal of loans to risky clients.

Net NPAs, as a proportion of net customer assets, increased to 0.45% as on 30th Sep’09 compared to 0.41% as on 30th Jun’09 and 0.43% as on 30th Sep’08. Gross NPAs as a proportion of gross customer assets stood at 1.21% as on 30th Sep’09, compared to 1.01% as on 30th Jun’09 and 0.91% as on 30th Sep’08.

The Bank had provision coverage of 86.66% as on 30th Sep’09 (as a proportion of Gross NPAs together with accumulated write-offs).  If the accumulated write-offs are excluded, the provisions held as a proportion of Gross NPAs would be 62.73%.

The Bank has restructured loans aggregating to Rs. 390.09 crores during the quarter, of which, Rs.94.13 crores were restructured under the Corporate Debt Restructuring (CDR) mechanism. The cumulative value of assets restructured till 30th Sep’09 was Rs.2,363.17 crores, constituting 2.53% of gross customer assets.

Statutory Requirements

The Bank is well capitalised with a Capital Adequacy Ratio of 16.47% as at the end of half year ending September 2009 compared to 12.20% as at the end of half year ending September 2008.

Credit Rating

The bank has high ratings for all of its deposits, though not always at the top. This may not affect its borrowing capacity in future. However the increasing non-performing assets is a cause of worry.

Year 2010 for Axis Bank

Year 2010 could expect Axis Bank to continue to be aggressive in its loans disbursement. The capital adequacy being at a high level there will not be any problem for it to grow its loan portfolio once the economy starts picking up.

The year 2009 also saw the change in leadership at Axis bank with Ms.Shikha Sharma coming over from ICICI Prudential Life Insurance. If she could repeat her magic in the previous company at Axis bank too, we have a winner at hand for the year 2010.

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