HDFC Securities maintained its Neutral rating on Axis Bank after its fiscal fourth quarter beat estimates but concerns on stressed assets and valuations still weighed. “We remain admirers of Axis Bank’s superior retail franchise: assets, liabilities and fees. However, sustained stress in the corporate book, slower resolutions and ample valuations keep us NEUTRAL with a target price of Rs 507 (2 times the Estimated Average Book Value FY19),” said HDFC securities in a research report.
The share price of Axis Bank rose 1.77% during intraday trade today, to close at Rs 509.60 on the BSE after falling 2.2% on Thursday even as the Q4 FY17 results of the bank were awaited.
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Axis Bank, country’s third largest private sector lender, Thursday reported 43 per cent decline in net profit to Rs 1,225.10 crore for the fiscal fourth quarter 2017 on higher provisioning for bad loans, which rose sharply. Its total income increased however to Rs 14,181.31 crore in the fourth quarter of 2016-17 as against Rs 13,592.97 crore in the year-ago period.
The bank’s gross non-performing assets (NPAs) or bad loans rose significantly to 5.04 percent of the gross advances as of March this year, as against 1.67 per cent a year earlier. Net NPAs were 2.3 per cent of the net advances during the quarter, as against 0.70 per cent in the same quarter previous fiscal. Consequently, provisioning more than doubled to Rs 2,581.25 crore for bad loans and contingencies from Rs 1,168.33 crore in the same quarter a year ago.
As on March 2017, the bank’s provision coverage, as a proportion of gross NPAs including prudential write-offs, improved to 65 percent, from 64 percent as on December 31, 2016. The bank’s board recommended 250 percent or Rs 5 dividend on the face value of Rs 2 each for the financial year 2016-17.