Axis Bank increases provisions for Q1 FY 21 as moratorium level falls. Axis Bank, one of the largest private lender has remained conservative since the Coronavirus pandemic broke. It had increased its level of provisions in the March quarter.
The banking Ltd. has taken this conservatism forward in the June quarter as well. The management believes that asset quality may turn for the better in the second half of FY21.
In the June quarter, the private sector bank beefed up provisions by 15.8% year-on-year and provided ₹733 crore specifically towards pandemic risks over and above the ₹3,000 crore made in the March quarter.
During the quarter, its corporate loan book grew faster than retail with 29% of incremental loans going to small businesses.
That said, Axis Bank has taken care that incremental loans go only to higher rated companies in the small and medium enterprises (SME) segment, and the government’s credit guarantee scheme has given it comfort as well. As such, its SME book shrank by 7% year-on-year.
“We have been able to offload weaker SME borrowers and given loans to only the better-rated ones during the quarter,” said Rajiv Anand, executive director at the bank.
In line with the trend among banks, Axis Bank too reported a fall in its moratorium levels. As of June-end, 9.7% of its loan book was under moratorium as against about 25% two months ago.
The bank said moratorium levels do not indicate asset quality. And it would rather follow the recovery prospects of companies to see how much stress is out there.
Notwithstanding a general improvement in bad-loan ratios and slippages, the bank preferred to make more provisions.
The bank has ₹6,898 crore in additional provisions over and above those needed for bad loans.
That said, the road ahead is still uncertain and the management hasn’t given clear guidance this time either. In fact, managing director and chief executive officer Amitabh Chaudhry said moratorium levels may have to be monitored as they can potentially move up.
On July 22 10:52 am, the stock was trading up by more than 5% at Rs 469.20 on the NSE.
