Axis Bank share price fell as much as 7.39 per cent in the morning trade on Wednesday amid concerns about the bank selling its loans to asset reconstruction companies at steep discount during the last quarter.
At 11.11 am, Axis Bank shares were trading 6.10 per cent down at Rs 489.50. The scrip opened at Rs 492.10 and had touched a high and low of Rs 495.70 and Rs 482.75, respectively, in trade so far.
“Gross slippages in the second quarter of FY16 were significantly high at Rs 2,600 crore as the bank decided to exit 2 accounts of Rs 1,820 crore of a particular group in power sector. The bank sold these account at 35 per cent value and used Rs 850 crore of floating provisions (out of Rs 1250 crore) to write off residual losses,” said, JM Financial in a research note.
Citigroup says loans were “aggressively” marked down, raising concerns about asset recognition/sales. IDFC Securities downgrades Axis Bank to “neutral” from “outperformer,” citing disappointing asset quality.
The bank had announced its quarterly earnings on Tuesday. During the quarter ending in September, Axis Bank reported a 18.93 per cent rise in net profit at Rs 1,915.64 crore. Net interest income saw a growth of 15.24 per cent on a year-on-year (yoy) basis to Rs 4,062.09 crore. Decline in Axis bank shares pulled the sectoral index for banking scrips down. The BSE Bankex was down over 1 per cent at 11.06 am.
In Q2FY2016, the advances growth picked up (23.1 per cent YoY) led by a strong uptick in corporate and retail loans (up 24.6 per cent and 26.6 per cent respectively). On the asset quality front, the reported NPA ratio remained stable on a sequential basis.
However, the bank sold loans worth Rs 1,850 crore to asset reconstruction company (ARC) for a transaction of Rs 650 crore (security receipts plus cash) due to stress in these accounts. The bank made impairment provision of Rs 336 crore towards sale of loans and utilised Rs 850 crore contingency provisions. The restructured loans were largely stable at around 2.8 per cent of the book.
Sharekhan in a research note said, “On the earnings front, Axis Bank continues to report a strong growth led by healthy pick-up in advances and steady net interest margins. While stress persists in certain sectors (infrastructure, iron & steel), we expect the bank to maintain its asset quality, which is better than peer banks. Going ahead, improving liability profile and increasing presence in retail will sustain operating performance. We expect Axis Bank’s earnings to grow at a CAGR of 19.1 per cent over FY2015-17 leading to an RoA (return on assets) of 1.8 per cent. We maintain our ‘Buy’ rating on the stock with a price target of Rs 652.”
Of 54 analysts covering the stock, 50 have “buy” or a higher rating, 3 “hold” and one “sell”, according to Thomson Reuters Eikon data.
(With inputs from Reuters)
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