Country's third biggest private sector lender Axis Bank's September quarter net plunged by 83per cent to Rs 319 crore due to spike in provisions as its asset quality deteriorates.
The Shikha Sharma-led bank had posted a post-tax profit of Rs 1,915.64 crore in the July-September period last year.
Total Income increased to Rs 13,698.7 crore in the period under review from Rs 12,001 crore for the quarter ended September 30, 2015.
Warning of further pain in the future, its chief financial officer Jairam Sridharan told reporters that the pain was primarily on account of a larger proportion of the assets placed under a 'watch-list' slipping into the NPA category.
The fresh slippages for the reporting quarter stood at Rs 8,772 crore, with as much as Rs 7,288 crore coming from the 'watch-list' announced earlier. This led to the bank's gross non-performing assets ratio shooting up to 4.17 per cent from
1.38 per cent in the year-ago period and 2.54 per cent in the preceding June quarter end.
"We now believe that slippage from the 'watch-list' may be higher than the 60 per cent we had originally envisaged,"
Sridharan told reporters on a conference call after the announcement of the results post market hours.
"A materially higher proportion of the 'watch-list' could turn NPA by the end of FY18. We are watching the operating environment closely, and are looking for some of the resolution mechanisms in the market to kick in," he added.
Reverses on the asset quality front led to jump in provisions, which shot up five times to Rs 3,622.74 crore from the Rs 707.17 crore in the year-ago period.
The bank, which had given a credit cost guidance of up to 1.50 per cent for the full year, has already witnessed the credit cost going up to 3.05 per cent on an annualised basis and Sridharan conceded that it will have to review the guidance.
The spike in the NPAs also resulted in the provision coverage ratio slipping to 60 per cent from 69 per cent in June and Sridharan informed reporters that the bank will strive to increase the same.
“Our intention is to increase the provision coverage ratio from its current level, which means increasing provisions on the already recognised NPAs so that as we enter the next financial year, we have a healthier position in terms of balance sheet strength," he said.
Even though the bank expects the slipages to be lower in the near term, the focus on improving the PCR will result in the credit cost being higher itself, Sridharan said.