Axis Bank shares slipped over 7 per cent in early trade on Wednesday after the lender reported weak financial results for the quarter ended September 30, 2016. Axis Bank registered 83 per cent decline in net profit for the July-September quarter at Rs 319 crore mainly due to higher provisioning for bad loans. The bank had posted a net profit of Rs 1,915.64 crore for the July-September period of FY2015-16.
According to Sharekhan, Axis Bank reported weak Q2FY2017 results mainly impacted by interest reversals and 5 times rise in provisions.
Provisions and contingencies of the bank increased by 412.29 per cent to Rs 3622.74 crore for the quarter ended September 30, 2016 against Rs 707.17 crore in the corresponding quarter a year ago. Net Interest Income (NII) grew by 11 per cent year-on-year to Rs 4,514 crore for the quarter under review.
Among the few positives in Axis Bank’s Q2FY2017 results was steady operating performance. The bank’s advances grew by 18 per cent YoY to Rs 3,53,170 crore (Retail Advances grew by 25 per cent YoY and comprised 42 per cent of Net Advances). Corporate Credit grew by 14 per cent YoY to Rs 1,58,029 crore and accounted for 45 per cent of Net Advances. SME Advances grew by 14 per cent YoY to Rs 45,857 crore. CASA Deposits constituted 45 per cent of total deposits with Savings Account (SA) growing at a strong 20 per cent YoY. Proportion of CASA on a daily average basis remained at the same level as in the previous quarter and constituted 41 per cent of total deposits.
Sharekhan maintained ‘Hold’ rating on Axis Bank shares post its Q2 results. The brokereage house said, “Despite the balance sheet clean-up seen during the last few quarters, the spike in NPA in Q2FY2017 was a negative surprise. The Axis Bank management indicated that FY2017 slippages may be more than the earlier guidance (around 60 per cent of slippage from watch list of Rs 22,628 crore). Going forward, there is heightened risk of slippages from the non watch list accounts as well, all of which will be negative for investor confidence. We have revised the target price down to Rs 560.”
Reliance Securities downgrade its recommendation to ‘Reduce’ from ‘Hold’ with a downward revised target price of Rs 474 (from 521 earlier). Jefferies also cut the bank’s target price to Rs 615 from Rs 620.
At 10.08 am, shares of Axis Bank were trading 7.66 per cent down at Rs 488.50. The scrip opened the day at Rs 497 and had touched a high and low of Rs 502.80 and Rs 488.45, respectively, in trade so far. Sensex was down 215.50 points, or 0.77 per cent, at 27,875.92.