Axis Bank results impress; stock rises 4%

Axis Bank, one of India’s largest private sector banks, clocked an impressive 28% growth in net interest income to Rs 3,838 crore for the quarter ended 31 December 2010, compared to the same period last year. Its net profit grew at 36% to Rs 891 crore, on a year-on-year (y-o-y) basis, and 21% over quarter ended 30 September 2010, which is commendable. 

Though interest income grew by 33% year-on-year for Q3 FY11, the interest expended (interest paid on deposits and borrowings) went up by 37% over the same period, resulting in the relatively lower growth in net interest income.
Axis Bank’s margins were stable. Even as the cost of funds went up 4 basis points sequentially to 4.79% in Q3, the net interest margin (NIM) went up a smart 13 basis points to 3.81%. However, the NIMs were higher in the second half of FY10 at over 4%.

Most of the other financial parameters – net advances (up 46% y-o-y), total assets (37%) and fee income (21%) – saw a robust growth. Its net non-performing assets too have reduced 5 basis points sequentially to 0.29% in Q3 FY11.

It was an important quarter for Axis Bank from the business point of view as it acquired the investment and equities business of Enam in November 2010 for an expensive Rs 2,067 crore in stock swap. Axis Securities and Sales, a wholly owned subsidiary of Axis Bank, would gain the investment banking, institutional equities, retail equities and retail businesses of Enam Securities. The challenge for the bank is to integrate the Enam business quickly.

The share price of Axis Bank has increased by 4% on January 18, 2011 to Rs 1279 while the Sensex which gained 1% to 19,092.

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