Axis Bank dips up to 7% on lower-than-expected PAT, higher provisions in Q1

Axis Bank slipped up to 7 per cent to trade at Rs 658 apiece in the morning deals on the NSE on Wednesday after the bank reported lower than expected net profit of Rs 1,370 crore in June quarter (Q1FY20), largely because of elevated provisioning.

The Bank's gross non-perfforming assets (NPA) ratio in the recently concluded quarter remained sticky at 5.25 per cent, not materially different from the previous quarter level of 5.26 per cent  The GNPA came in at Rs 29,405 crore, down 1.2 per cent quarter-on-quarter, from Rs 29,789 crore in the March quarter of 2019. 

The Bank's slippages were Rs 4,798 crore during Q1FY20, compared to Rs 3,012 crore in Q4FY19 and Rs 4,337 crore in Q1FY19. Recoveries and upgrades from NPAs during the quarter were Rs 2,177 crore while write-offs were Rs 3,005 crore. Consequently, net slippages for the quarter stood at Rs 2,621 crores as compared to Rs 636 crores in Q4FY19 and Rs 1,420 crore in Q1FY19, the bank's financial data show. Further, the private lender's provisions increased to Rs 3,814.58 crore up from Rs 3,337.7 crore in the year ago period and Rs 2,711.43 crore in Q4FY19.

Analysts, however, cite the bank's exposure to stressed corporates as the reason for weak asset quality in this quarter.

"Fresh slippages were higher qoq and reached 4.4 per cent of loans, mainly led by higher corporate/retail NPAs, but higher write-offs have helped the bank report a nearly flat GNPA ratio of 5.25 per cent of customer assets. Management indicated exposure to stressed corporates recently in news, including NBFC/HFC, Media, Travel & tourism, Commodity and Plastics, at Rs70bn, of which nearly Rs 11 billion slipped into NPA and almost Rs 29 billion into the stress pool, while the balance remains outside the stress pool given that the exposures are still above investment grade," wrote analysts at Emkay Global in a result review note.

"Axis Bank has delivered a modest quarter in a challenging economic environment. We cut our FY20/21 earnings estimates by 7 per cent/6 per cent to factor in the slight increase in our credit cost. Post a strong performance of last couple of quarters, Q1 earnings and outlook reflect the deterioration in the underlying lending environment, which can further risks our estimates," analysts at Motilal Oswal Financial Services wrote in their results preview note.

At 9:42 am, the stock of the bank was trading at Rs 679.6, down 4 per cent as against a 0.36 per cent decline in the Nifty50.