Thursday, 24 May, 2018

Axis Bank posts first loss as NPAs rise

Yes Bank’s Net interest income increased 31.4% to Rs2,154.24 crore as against Rs1,639.70 crore last year Yes Bank’s Net interest income increased 31.4% to Rs2,154.24 crore as against Rs1,639.70 crore last year
Heather Davidson | 30 April, 2018, 03:44

The bank saw its provisions and contingencies spiking almost three-fold to Rs 7,179.53 crore in the fourth quarter against Rs 2,581.25 crore previous year. The Mumbai-based bank reported a loss of Rs 2190 crore, the first in data going back to 2006, and compared with a Rs 662 crore profit predicted in a Bloomberg survey of 15 analysts.

Provisions climbed to Rs 7180 crore ($1.1 billion) in the three months ended March from Rs 2810 crore the previous quarter as an additional Rs 16500 crore of fresh defaults were identified after the implementation of tighter regulations, the bank said in an exchange filing late Thursday. This is the private sector lender's maiden quarterly loss since its incorporation in 1993.

Bulk of the 32 per cent unsecured loan book is unsecured, he said, adding non-performing assets in the credit card business are at 0.88 per cent, which is lower than 1.25 per cent for retail segment and the overall 1.40 per cent reported by the bank. Investors cheered bank's decision to speed up recognition of stressed loans.

Total income during the fiscal increased to Rs 56,747.40 crore, from Rs 56,233.47 crore. "After making mandatory appropriations to statutory reserve, investment reserve and capital reserve, no profit is available for distribution as dividend for the financial year ended 31 March 2018".

Around 94 per cent of the bank's total advances are eligible for classification as priority sector loans.

It was successful to increase its provision coverage ratio by 5 percentage points in a single quarter to 58 and exuded confidence of breaching the 60-percent mark in the next six months. Chief executive Shikha Sharma, who is due to step down at the end of December after being at the helm for nine years, said the results were a reflection of the bank's desire to accelerate NPA (non-performing asset) recognition.

"The year 2017-18 has been a watershed year for the bank". "This journey continues", said Ms. Sharma, who has chose to step down from the helm at the end of December.

According to reports, the RBI may have been upset with the wide divergence in asset quality reporting by Axis Bank, spiralling bad loans, violations of know-your-customer norms during demonetisation.

At this target price, Axis Bank stock would trade at 2.2 times book and 14 times March 2020E EPS for RoEs in the range of 13-14 per cent. It reached a day's high of Rs 500.35 on BSE and the day's bottom of Rs 484.65 before closing down 0.77 per cent at Rs 494.55 on BSE.

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