Axis Bank share price falls further, should you invest?

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Updated: October 29, 2015 4:17:25 PM

After falling over 7 per cent on Wednesday the share price of Axis Bank plunged as much as 3 per cent on Thursday amid concerns about the bank selling its loans to asset reconstruction companies at steep discount during the last quarter.

axis bank sharesAfter falling over 7 per cent on Wednesday the share price of Axis Bank plunged as much as 3 per cent on Thursday amid concerns about the bank selling its loans to asset reconstruction companies at steep discount during the last quarter. (Photo: Reuters)

After falling over 7 per cent on Wednesday the share price of Axis Bank plunged around 3 per cent on Thursday amid concerns about the bank selling its loans to asset reconstruction companies at steep discount during the last quarter.

The share price of Axis Bank closed 2.81 per cent down at Rs 469.40 on Thursday.

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 y-o-y basis to Rs 4,062.09 crore.

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.

For the further movement, KR Choksey Shares and Securities in a research note said, “Axis Bank has been able to deliver consistent core operating earnings with superior retail loan book accretion and consistent healthy fee-income performance. While Axis Bank boasts of well capitalised balance sheet and rich liability franchise supported by its huge presence in retail and corporate lending, the credit quality concerns now have come to the fore. Against this backdrop, we maintain ‘Accumulate’ rating on the stock with a target price of Rs 600.”

Prabhudas Lilladher in a research note said, “We expect stock to remain under pressure in near term but maintain positive stance from a medium term perspective. We believe the share price of Axis Bank can touch Rs 615 in the next few quarters.”

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