Axis Bank ratings unaffected by sharp rise in non-performing assets: S&P

The sharp rise in bad loans is part of a balance sheet clean-up exercise underway in the Indian banking system, the agency said in its report

Global rating agency Standard and Poor's (S&P) on Thursday said rating assigned to various instruments issued by Axis Bank were unaffected by the sharp rise in its non-performing assets.

The increase in bad loans was part of a balance sheet clean-up exercise underway in the Indian banking system, the rating agency said.

Axis Bank results for the year ended March 31, 2018, underscore high stress levels in its corporate loan portfolio and the Reserve Bank of India's commitment to recognise and resolve these issues.

The bank classified most of its stressed assets as non-performing and set aside appropriate provisions, leading to a jump in gross non-performing loans (NPLs) and a 92  per cent decline in full-year profit to Rs 3 billion.

Axis' gross NPLs rose to 6.77 per cent of total loans, from 5.04 per cent for the previous year.

"Results do not affect our 'BBB-/A-3' rating on Axis, because we anticipated higher NPLs", S&P said in a statement.

Moreover, the Indian bank's financial results to improve over the next two years as it resolves problem loans.

The most stressed loans in the banking sector will be recognized as non-performing as of March 2018. This will lead to weak financial results over the short term but is critical to cleaning up bank balance sheets for long-term prosperity, it added.