Your initial thoughts on Axis Bank numbers.
Compared to what we expected, the provisioning has been much steeper. We actually thought at nearly 2.2% standard asset coverage, Axis may not need to do much more. Unfortunately, they have continued to do a lot more on the provisioning front. So maybe it is worth listening to their commentary about why they want to cushion their balance sheet as much as they have done. What is it that they see in their book that gives them any cause for alarm. That is what we would watch out for. Otherwise, there is not much of a divergence from what we expected.
What do you think about the fact that fee income is growing at around 5-6% sequentially and YoY,. Is that in line with expectations? How do you factor that into the NII growth they have shown this quarter?
Their wholesale book is growing a little faster. They have 11% YoY growth on wholesale, retail is probably in the high single digit. So it is dominated by wholesale credit growth at this point of time. In light of the fact that they should want to be selective in terms of choosing corporate borrowers, I do not think the fee environment is extremely attractive and so fees are under pressure. So that is not very surprising. Fee growth is a little slower but this is despite the fact that retail disbursements are at an all-time high during the October-December quarter for them. Despite that, if fee growth has been subdued, it could mean the drag from earlier accounting entries which were used to upfront recognise a lot of fees. So, we may not be comparing apples to apples in a way.
Last year this quarter, they would have booked a lot more upfront. This year they are amortising a lot more and that may have something to do with smoothening of the fee income a lot more compared to what it used to be earlier.
