Axis Bank falls 7% as incremental stress spikes in September quarter

Shares of Axis Bank tumbled over 7 per cent in trade on Wednesday as the private sector lender failed to meet Street expectations for the quarter ended September 30.   

The stock ended the day 7.36 per cent down and was the worst performer on both the benchmark indices. The script hit an intraday low of Rs 482.75, down 7.39 per cent, on Bombay Stock Exchange (BSE).

"The company's slippages were much higher at Rs 2570 crore (including Rs 1820 crore sold to ARCs) and consequently incremental stress (slippages + restructuring) was way higher at Rs 3000 crore, indicating that the bank will overshoot its annual guidance of Rs 5700 crore in FY16," said Edelweiss Securities in a research note.

However, the bank sees this as one off event and maintains credit cost guidance.

"The de-risking strategy continues to help Axis Bank leverage the turning corporate cycle. The bank's well capitalised position (Tier I: ~11.2%), stable funding franchise and stressed assets at ~4.2% lend comfort. We maintain 'BUY/SO'," added the brokerage.

Axis Bank on Tuesday reported a 18.93 per cent increase in its net profit at Rs 1,915.64 crore for the second quarter ended September 30. The bank's net profit in the corresponding quarter of the previous fiscal stood at Rs 1,610.71 crore.

"Total income has increased to Rs 12,001.01 crore during the quarter under review, from Rs 10,549.97 crore earned a year ago," Axis Bank said in a regulatory filing. The asset quality of the bank, however, slipped a tad as gross non-performing assets (NPAs) or bad loans rose to 1.38 per cent of gross advances as of September 2015 as against 1.34 per cent a year ago.

Likewise, net NPAs as a percentage of net advances during the second quarter stood at 0.48 per cent as against 0.44 per cent. Further, the bank said that during the ensuing quarter it acquired the entire share capital of Axis Securities Europe Ltd for a consideration of Rs 19.02 crore from Axis Capital Ltd, a wholly-owned subsidiary of the Bank. The bank's shares were trading at Rs 523.60, up 0.47 per cent on BSE in late afternoon trade.