The fresh slippages, the bank said, came primarily from iron & steel and textile sectors
The Axis Bank stock continued to get hammered as the asset quality continued to trouble investors. The bank stock plunged 8.04% to close at Rs 486.50 a share on the BSE.
The Sensex and Nifty fell nearly 1%, dragged down by financial stocks such as Axis Bank after the lender reported a sharp fall in its quarterly profit, with weak global cues further weighing on the sentiment. Major Sensex losers were Axis Bank which was down 8.04%, Tata Motors down 4.27%, Tata Steel down 4.01%, ICICI Bank down 3.65% and Adani Ports down 2.43%, while the top five gainers were Bharti Airtel which was up 2.25%, Hero MotoCorp up 1.92%, Maruti 1.56%, Dr Reddy's up 1.34% and HUL up 1.29%.
Axis Bank officials in an interaction with analysts said the power sector tops the watch list as 41% share of the total exposure to the sector is under watch list, followed by 13% for oil & gas sector. The fresh slippages, the bank said, came primarily from iron & steel and textile sectors. The bank expects significantly higher slippages from the watch list compared to earlier estimates of 60%.
The asset quality of the bank deteriorated in the second quarter with the bank reporting Rs 8,800 crore of new slippages from its corporate book. Though watchlist of the bank came down, the corporate book continues to worry the bank with 90% of the fresh slippages during the quarter coming from the corporate book. The watchlist of the bank came down to Rs 13,800 crore in the second quarter from Rs 20,300 crore in the preceding quarter.
Nilanjan Karfa, an analyst at Jefferies research firm said in a report, “We expect the stock to react negatively but we expect an eventual recovery in FY18. Slippages are expected to be elevated. We forecast Rs 8,000 crore in additional slippage in second half of FY17 and as was our practice continue to factor 50% haircut across cases where the bank has implemented the 5:25 scheme, and strategic debt restructuring cases while calculating the adjusted book value. We believe profitability will be weaker over next two quarters.\"
The total stressed assets stood at 5.46% of total advances rising sharply on a sequential basis from 4.21% in Q1FY17. The provision coverage ratio including technically written-off accounts fell significantly to 60% from 69% in the preceding quarter. However, the management guided for this ratio to be around 70% in the medium term.
Reliance securities said in a report, “Total slippages from watch list accounts to NPA stood at 32% and the bank had revised its guidance of slippages from watch list from earlier 60% to significantly higher level for FY17E & FY18E. Consequently, we expect elevated level of fresh slippages along with higher credit cost in coming quarters.
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