Axis Bank shares slump over 9% to 8-month low as bad loans rise; fear flows into SBI, ICICI Bank
Axis Bank shares on Wednesday morning slumped over 9% to eight months low, a day after the bank reported that a rise in bad loans in the second quarter ended September. The shares of the private lender bank tumbled 9.4% to Rs 465.15, lowest since February 2, to become top loser on the NSE index. Axis Bank reported a nearly 36% increase in net profit at Rs 432 crore in the second quarter ended September but said their gross non-performing assets (NPAs) of the bank rose to 5.90% as compared to 4.17% in the same period a year ago. At the same time, the net NPA also inched up to 3.12% as against 2.02% in the same quarter of the previous fiscal.
As a result, the gross NPA shot up in absolute terms to Rs 27,402 crore at the end of September as compared to Rs 16,379 crore at the end of the second quarter of the previous year. Gross NPA additions for the second quarter stood at Rs 8,936 crore, of which corporate slippages stood at Rs 8,110 crore, it said.
Following the dent in the asset quality of the Axis Bank, the shares of the State Bank of India and ICICI Bank on Wednesday also fell by over 2% in an early trade. The shares of the State Bank of India were trading at Rs 245.95, while ICICI Bank at Rs 266.35 on Wednesday morning.
On the back of low asset quality, brokerages have cut target price on bank’s stocks. Jefferies has slashed the target price on stock to Rs 635 from Rs 675, although, maintaining a “buy” rating, while Morgan Stanley lowered its target price to Rs 480 from Rs 550 with an “equal-weight” rating.
“Surge in the non-performing loans implies continued uncertainty. The net interest margin in Q2, which narrowed to 3.45% from 3.63% a quarter earlier, was under pressure and will likely remain so, impairing earnings ” Reuters quoted Morgan Stanley as saying. According to Thomson Reuters Eikon data 19 out of 48 analysts covering the stock rate it at “buy”, 16 have “hold”, while 13 have a “sell” rating.
The bank had posted a net profit of Rs 319 crore for the July-September period of 2016-17. Total income increased to Rs 13,821 crore in the period under review from Rs 13,698.7 crore for the quarter ended September 30, 2016, Axis Bank said in a statement. The bank has a total loan outstanding of Rs 7,041 crore against the Insolvency and Bankruptcy Code (IBC) accounts mentioned in the two lists referred by RBI. “Incremental provisions of Rs 505 crore on these select accounts have been made during the quarter taking the total provisioning against these select accounts to Rs 3,886 crore with an improved provision coverage ratio at 55 per cent,” it said.