Axis Bank slips 7%; hits one-month low

The stock dipped 7% to Rs 483, its lowest level since September 16, 2015 on NSE.

Axis Bank has dipped 7% to Rs 483 in intra-day deals, its lowest level since September 16, 2015 on the National Stock Exchange (NSE) after the bank classified two power sector exposures worth of Rs 1,820 crore as non-performing assets (NPAs) and sold them to asset restructuring companies (ARC) for a loss of around 65%, reports suggest.

According to analyst at HDFC Securities, with the sale to ARC, Axis Bank’s asset quality was stable with gross/net NPA increasing by a mere 5/6% quarter-on-quarter (QoQ). Gross stressed additions for first half (including assets sold to ARC) stood at Rs 4,800 crore (3.3% ann.), which were higher than expectation, given the management's guidance of gross stressed additions of less than Rs 5,700 crore in FY16.

"Higher ARC sale and 5:25 restructuring is negative for the stock. We expect the bank’s loan growth is likely to remain above the industry and its earnings profile strong over FY16-FY17”, said analysts at Religare Institutional Research and maintain ‘buy’ rating with target price of Rs 750.

"Asset quality performance during the quarter surprised negatively led by lumpy exposure. However, levers build with the one off gains helped to overcome the problem without much hit on earnings," said analysts at Motilal Oswal Securities in a recent report.

"Healthy core operating performance compensated lower trading gains; however, stress addition guidance surprised negatively," added the analyst, and reiterated ‘buy’ rating on the stock with a target price of Rs 650.

At 11:42 am, the stock was down 6% at Rs 490 on the NSE. A combined 17.56 million shares changed hands on the counter on the NSE and BSE so far.