Axis Bank’s Shares Fall After CEO Warns of Jump in Provisions
A customer exits an Axis Bank branch in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Axis Bank’s Shares Fall After CEO Warns of Jump in Provisions

(Bloomberg) -- Axis Bank Ltd.’s shares fell after the lender posted a loss and warned of higher provisions against potential defaults stemming from the coronavirus outbreak in India.

Brokerages including Prabhudas Lilladher and Emkay Global cut their recommendation on the stock to ‘hold’ from ‘accumulate.’ The Mumbai-based lender late Tuesday said provisions surged 185% to 77.3 billion rupees for the quarter ended March 31 from a year earlier, of which 30 billion rupees are for Covid-19 related exposures.

“The uncertainties around asset quality may act as a major overhang on the stock in near term,” PhillipCapital India Pvt. analysts Manish Agarwalla and Sujal Kumar wrote in a note.

The virus will be a headwind for the year started April 1 and provisions will increase materially, Chief Executive Officer Amitabh Chaudhry said on a briefing call on Tuesday. He said the bank will further tighten risk controls when deciding on new loans.

Axis Bank’s board also approved to raise 350 billion rupees ($4.6 billion) which will take place through the sale of bonds, including possibly foreign currency notes.

More details:
  • Axis Bank reported a 13.9 billion rupee loss for the quarter ended March 31 compared with a 15.1 billion rupee profit the previous year
  • Total provisions surged to 77.3 billion rupees from 27.1 billion rupees a year earlier
  • Gross bad loans were 4.86% of total advances versus 5% at end-December
  • Deposits grew 17% to 6.4 trillion rupees in the year through March 31
  • Overall capital adequacy at 17.53% with common equity tier 1 ratio of 13.34%

Axis Bank’s shares fell 3.2% as of 9:27 a.m. in Mumbai on Wednesday.

It joins peers including Kotak Mahindra Bank Ltd. in seeking additional funds as lenders prepare for the fallout of a rare economic contraction in India. The world’s strictest shelter-at-home restrictions are hurting business activity and while regulators permitted loan-repayments to be frozen for three months, authorities also asked banks for additional provisions.

Kotak Mahindra Bank last week announced plans to issue about $1 billion of new shares to bolster capital buffers.

©2020 Bloomberg L.P.

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