Axis Bank asset quality may deteriorate more than expected, says Moody's

On October 17, Axis Bank reported a 24 per cent quarter-on-quarter increase in non-performing loans in the quarter that ended September 2017

Global ratings agency Moody's on Thursday said private lender Axis Bank's asset quality may deteriorate further and more than what was previously expected over the next 12-18 months.

In addition, compared to the other rated Indian banks, the bank has been a laggard in recognising its asset quality problems, a credit negative for its credit quality, Moody's said in its statement.

Axis Bank's asset quality deteriorated significantly in the September quarter. On October 17, Axis Bank reported a 24 per cent quarter-on-quarter increase in non-performing loans (NPL) in the quarter that ended September 2017.

The gross NPL ratio increased to 5.9 per cent at end of September 2017, from five per cent in the quarter ended June 2017. It is higher than expectations and a credit negative for the bank.

Of the Rs 8,110 crore in new corporate NPLs during the September quarter, Rs 4,870 crore were recognised after an inspection by the Reserve Bank of India (RBI). Strikingly, only half of these were on the bank's watch list, announced in March 2016, which identified accounts with weak credit metrics that were not yet classified as NPLs, Moody's added.