India’s third largest private sector-lender registered its highest intra-day fall, as Axis Bank shares fell by more than 9.4% intraday to Rs 465.15 on NSE this afternoon. CLSA has a buy rating on the stock with a target of Rs 612.
India’s third largest private sector-lender registered its highest intra-day fall, as Axis Bank shares fell by more than 9.4% intraday to Rs 465.15 on NSE this afternoon. Yesterday, Axis Bank reported a net profit of Rs 432 crore in the July-September quarter, well below analyst estimates which had pegged net profit at Rs 1,318 crore. Research and brokerage firm CLSA has retained a buy rating on the stock, with a target price of Rs 612, from the earlier target of Rs 620. The firm said that it maintains a buy, as it expects quality/earnings to normalise. Further CLSA said that the management expects recoveries in IT accounts, but other accounts take longer.
On Tuesday evening, the bank reported that the RBI wasn’t happy with its classification of nine large corporate accounts as standard assets. As a result, the non-state-owned bank, the country’s sixth-largest by market value, has decided to rebrand the entire $750 million as nonperforming, Bloomberg reported. CLSA has also cut earnings estimates.
The second quarter net profit for the bank was 35 percent higher than a year-ago, when the lender had seen a jump in bad loans. The bank’s corporate lending continued to suffer with rising bad loans, and its retail segment profitability was dented with a fall in pre-tax profit.
“Slippages were elevated due to divergences in classification of assets pointed out by the RBI, this impacted profits and asset quality metrics,” said Jairam Sridharan, CFO, Axis Bank. “Asset quality outlook depends on the trends in the corporate accounts which are rated low. Considering that such pool of loans has seen sizeable reduction, credit cost is expected to normalise from the second half of next fiscal,” Jairam Sridharan said on Tuesday.
While CLSA has retained a buy, Quant Capital has slashed its rating to reduce with a target price of Rs 504. Notably, Bank of America Merrill Lynch has retained a buy with a target of Rs 590. According to Goldman Sachs, the bank’s results were “the most disappointing quarterly earnings” as it missed on all key operating parameters. Axis Bank shares closed at Rs 495, down by more than 9.3% since yesterday.