BENGALURU, Jan 16 (Reuters) - India's Axis Bank reported a lower-than-expected increase in quarterly profit on Thursday due to a slowdown in loan growth and increased provisions for potential bad loans.
The country's fourth-largest private lender in terms of market capitalization stated that its standalone net profit - excluding earnings from its subsidiaries - increased by 4% to 63.04 billion rupees ($728.48 million) for the three months ending in December.
Analysts, who had anticipated an average profit of 65.16 billion rupees, were informed based on estimates gathered by LSEG.
Indian banks have been dealing with a rise in non-performing loans, particularly in areas like microfinance and unsecured portfolios, leading them to allocate more funds to cover potential losses.
Axis Bank's provisions and contingencies, designated for possible bad loans, more than doubled to 21.56 billion rupees compared to the previous year.
During a conference call, Chief Financial Officer Puneet Sharma mentioned that the bank had primarily set aside funds for its "unsecured retail portfolio" due to the current market conditions.
The bank's gross non-performing asset ratio, a crucial gauge of asset quality, stood at 1.46% at the end of December, a slight increase from 1.44% three months earlier.
Executive director Subrat Mohanty stated in the same call that the bank had intentionally moderated loan growth to account for pressures in specific segments.
Axis Bank's loans expanded by 9% year-on-year in the December quarter, a slower growth rate compared to the 11% increase in the previous quarter, while total deposits also increased by 9%.
Net interest income, which reflects the difference between interest earned and paid, grew by 9% to 136.06 billion rupees, falling short of analysts' expectations of 137.87 billion rupees according to LSEG data.
The net interest margin, a key indicator of profitability, decreased to 3.93% from 4.01% the previous year and 3.99% in the preceding quarter.
Sharma mentioned that the bank's target is to maintain a net interest margin of 3.80% in the medium term.
($1 = 86.5350 Indian rupees)