Axis Bank and Kotak Mahindra Bank reported lower year-on-year growth in net interest income (NII) in the second quarter as loan disbursements picked up towards the end of the quarter.

Axis Bank’s net interest income or core income grew by 7.8% to ₹7,900 crore in the three months ended September compared to ₹7,326 crore during the same period last year.

This was primarily on account of a 19-basis point (bps) year-on-year (y-o-y) fall in net interest margins to 3.39%.

Margins were impacted negatively by 13 basis points sequentially because of a change in loan mix, as high-yielding loans were paid off.

The bank, however, reported net profit of ₹3,133.3 crore in the three months ended September because of lower provisions, up 86% from ₹1,682.7 crore reported in the year-ago period.

“We believe consumer and business confidence will continue to trend upward in the second half (October-March) as vaccination coverage rises and the economy opens up and pent-up demand and spends materialize,” said Amitabh Chaudhry, managing director and chief executive officer, Axis Bank.

“The pandemic notwithstanding, we have continued progress in our strategy in the past 18 months. We have put legacy asset quality issues fully behind us, strengthened our balance sheet and invested deeply in digital and technological capabilities,” he said.

“We are now clocking strong growth in retail, SME (small and medium enterprises) and transactional banking business,” he added.

Axis Bank’s asset quality was steady as gross non-performing assets as a percentage of the total book declined sequentially by 32 basis points to 3.53%. However, the restructured book expanded to 0.64% during the second quarter from 0.33% in the previous quarter.

Fresh slippages during the quarter stood at ₹5,464 crore at the end of September compared to ₹6,518 crore in the previous quarter.

The bank said its net exposure to the two lending companies of Srei Group, which were superseded by the Reserve Bank of India, stood at zero as they have fully provided for the account.

The other private sector lender, Kotak Mahindra Bank, reported a 7% y-o-y fall in net profit to ₹2,032 crore at the end of the September quarter because of higher provisions.

The bank saw a strong pick-up in loan growth to 15% y-o-y, of which housing loans contributed 46% y-o-y.

The management’s strategy of focusing on market share gains in the housing segment through competitive pricing seems to be gaining momentum.

Its asset quality remained stable with gross non-performing loan ratio down to 3.2% from 3.5% in the previous quarter.

The bank’s net interest income rose just 3% y-o-y to ₹4,020.56 crore at the end of September.

“We will not get that growth in net interest income for the second quarter. We should see the numbers coming in during the October-December period,” said Jaimin Bhatt, chief financial officer, Kotak Mahindra Bank.

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