Mumbai: India's third largest private lender Axis Bank on Saturday reported a 25 percent growth in net profit at Rs 920.32 crore in the second quarter on the back of higher net interest income and rise in low-cost deposit base.

Total income rose 39.8 percent to Rs 6,510.89 crore in the July-September period, up from Rs 4,657.49 crore a year ago.

"Overall, this was a good quarter for us with a balanced growth in all segments of the business. Our net profit has risen on account of higher net interest income (NII), sound growth in advances along with rise in cheap cost (Casa) deposit base," Axis Bank Chief Financial Officer Somnath Sengupta told reporters in a conference call.

He further said the bank is hopeful of maintaining the growth momentum in the second half of the fiscal.

NII in the second quarter rose by 24.28 percent Rs 2,007.26 crore compared to Rs 1,615.10 crore reported a year ago. Similarly, net interest margin (NIM), which is difference between the interest it pays on deposits the one it earns on advances, improved to 3.78 percent from 3.68 percent registered earlier.

However, Sengupta warned of pressure on NIM in the rising interest rate scenario. "We see some kind of pressure on the NIM due to the rising interest rate regime. Margins will be in the range of 3.25-3.50 percent by the end of this fiscal from the present level".

The bank has also shown sound growth on the credit and deposit fronts during this period. While advances grew 26.68 percent to Rs 1,40,089 crore, its demand deposits rose by 26 percent to Rs 82,140 crore during the reporting quarter.

"Both deposit and advances have shown sound growth in the last quarter. However, we expect credit growth to slow down in the rest of this fiscal. Still, it will be 2-3 percent higher than the system," Sengupta said.

The bank has witnessed steady growth in retail advances by clocking a close to 40 percent growth in advances in the first half of this fiscal.

The current account, savings account (Casa) deposit base has grown to 42 percent of the aggregate deposits in the second quarter.

The lender also reported a marginal decline in its gross NPA to 1.08 percent from 1.12 a year earlier, but the net NPA remained same at 0.34 percent for both the periods. However, net NPA on quarterly basis rose by 0.03 percent.

"There is some pressure on SME segment loans due to rising interest rate regime. However, we will be able to maintain our asset quality in future," Sengupta said.

On the capital adequacy front, the bank had a CAR of 11.35 percent by the end of September.

"We don't have any plans to raise capital in the current financial year as we are adequately capitalised," he said.

Referring to the possibility of raising interest rates, Sengupta said there is limited scope to pass on the interest rate rise to consumers in case of a further rate hike by the Reserve Bank, which is scheduled to announce the second quarter monetary policy on Tuesday and is widely expected to hike repo rate by 25 bps.

(Agencies)