India’s Axis bank slumps after profit miss, asset quality concerns

Bloomberg

Axis Bank Ltd., India’s third-largest private-sector bank, slumped the most in two years after profit missed estimates and it forecast higher credit costs.
The stock fell as much as 9.4 percent in Mumbai trading, the biggest intraday drop since August 2015, and traded 8.3 percent lower at 470.35 rupees as of 11:46 a.m. local time. The lender reported second-quarter net income of 4.3 billion rupees ($66 million) on Tuesday after markets shut, lower than the 13.2 billion rupees forecast by analysts surveyed by Bloomberg.
Axis expects credit costs for the year to amount to 220 to 260 basis points, compared with an earlier estimate of 175 to 225 basis points due to higher slippages in bad loans, Chief Financial Officer Jairam Sridharan said on a conference call after the earnings.
The lender’s gross bad loans stood at 5.9 percent of total lending at the end of September, compared with 4.17 percent the previous year, Axis said.
Analysts from at least five brokerages cut their target prices on Axis shares. The bank’s results were “the most disappointing quarterly earnings” as it missed on all key operating parameters, according to a note from Goldman Sachs Group Inc.
Axis expects its credit costs to normalize by the second half of its 2019 financial year as it anticipates its pool of stressed accounts to shrink, Sridharan said.