Axis Bank shares drop after Q1 profit misses estimates

On a sequential basis, net profit fell 19.31 percent and net income slipped 2.83 percent.

Axis Bank shares fell as much as 3.30 percent to Rs 731.20 in intraday trade.

Axis Bank's net interest income (NII) rose 11 percent YoY to Rs 7,760.3 crore. Its gross and net non-performing assets (NPAs) as a percentage of total loans came in at 3.85 percent and 1.20 percent respectively at the end of June 30. At the end of March, they had come in at 3.70 percent and 1.05 percent respectively.

Consequently, there were net slippages in NPAs (before write-offs) for the quarter of Rs 3,976 crore as compared to Rs 1,822 crore in Q4FY21 and net slippages of Rs 1,610 crore in Q1FY21. Net slippages in NPAs (before write-offs) for Retail and SME loans stood at Rs 3,741 crore and Rs 84 crore respectively.

On Axis Bank's Q1 performance, domestic brokerage HDFC Securities pointed that the bank’s journey towards normalised credit costs and steady-state profitability has yet again been derailed and interrupted by deterioration in asset quality.

"Although the headline asset quality trends are consistent with those of other lenders (lower collections and higher slippages), incremental slippages disappointed with the mix largely driven by the retail portfolio," it added.

While the lender held healthy surplus Covid provisions and maintained a comfortable PCR, its performance on asset quality has been inconsistent, said HDFC Securities, which maintains a 'buy' on the stock with a SOTP price of Rs 825.

HDFC Securities said it expects Axis Bank's credit costs to normalise in the second half of FY22. The brokerage said it sees the lender reverting to steady-state profitability by FY23.

Higher slippages led to the increase in the lender's GNPA ratio, however, its contingent buffer looks adequate, according to LKP.

"The future outlook of asset quality is at manageable level as the strong standard asset coverage is likely to absorb delinquencies or restructuring," said the brokerage, which recommends a 'buy' on the stock with a positive outlook in view of the lender's adequate Covid buffer, strong capital position and lower restructuring pool.

At 1:30 pm, the stock traded down 2.68 percent at Rs 735.90 apiece on BSE, underperforming the 30-scrip benchmark index S&P BSE Sensex, which was down 0.49 percent at 52,594.99.