Shares Of Axis Bank Drop Most In Nearly A Year On Higher Stressed Assets
Axis Bank had Rs 12,200-crore exposure to eight stressed accounts, including bad loans and BB & Below book in the first quarter.
Shares of Axis Bank Ltd. fell the most in nearly a year as the private lender reported higher stressed assets in the quarter ended June.
The bank disclosed a fresh exposure worth Rs 6,700 crore to eight stressed accounts in sectors such as power, telecom, home financiers, travel, commodities, plastic and media, among others, it said in a conference call with analysts post the earnings announcement. These accounts, however, are neither non-performing assets nor belong to BB & Below book—non-investment grade.
The lender also disclosed a non-fund-based exposure to existing bad loans—such as guarantees and letters of credit—worth Rs 2,800 crore.
Axis Bank had an existing watchlist of Rs 10,882 crore. Including the fresh disclosure, the bank’s total exposure to stressed accounts now stands at Rs 20,382 crore—which is 4 percent of the total advances, higher than 2.5 percent as of March.
The bank’s gross bad loans remained stable at 5.25 percent of the advances. That’s despite lower recoveries and higher slippages as the private lender wrote off loans during the quarter.
Axis Bank’s stock fell as much as 7 percent compared with the NSE Nifty Private Bank Index’s 1.05 percent drop.
Here’s what brokerages have to say about Axis Bank:
Macquarie
- Maintains ‘Outperform’ with a target price of Rs 925 a share.
- About 60 percent rise in the de-facto watchlist, slippages are worrisome.
- Bank is slipping back into old habits.
- Willing to repose faith in bank’s disclosures given Mr. (Amitabh) Chaudhary’s track record.
- Monitoring fresh stress formation.
CLSA
- Maintains ‘Hold’ and cuts target price to Rs 900 from Rs 1,000 apiece.
- Weaker asset quality drives cuts in earnings and target price.
- Slippages higher and new stress arises.
- Capital-raising will be return-on-equity dilutive.
- Improvement in asset quality trends key to re-rating.
Morgan Stanley
- Overweight with a target price of Rs 1,100 apiece.
- Strong growth and mixed asset quality.
- Asset quality progression is likely to remain the key driver for the stock in the near term.
- Slippages should be lower from the second quarter of FY20.
- Stock has corrected by 13 percent from its recent highs, valuations look attractive.
Prabhudas Lilladher
- Retains ‘Accumulate’ and lowers target price to Rs 766 from Rs 837 apiece.
- Additional stress adds risks to performance.
