Axis Bank pushes quality pressure, but there are many concerns in the market

Axis Bank tightened its wealth classification and income recognition standards, indicating a further Rs SERV-based credit approach, which denies the June-Quarter profitability of the LEA. An unexpected bottom contraction reduced the stock more than 5% on Friday, forcing the Nifty’s retreat, on which Axis Bank has the third largest weight of a private lender.

“Asset taxonomy occurs on a de-past-D (DPD) counter base, but the classification can also be based on qualitative parameters,” CFO of Axis Bank, Puneet Sharma, said that during the subsequent earning analyst Call. “These are non-DPD-lead parameters that have been tightened, resulting in high slippery for the quarter.”

Sharma explained that under the previous standard, if the oral borrower with a personal loan of ₹ 100 was previous and agreed to the settlement plan, the account would be upgraded on the first installment payment with a one -month -old. Under the new technical standards, such accounts will no longer be upgraded until full settlement.

The technical effect is limited to large amounts of cash credit, overdraft products and accounts under one-time colonies (OTS).

This change has adversely affected the bank’s profitable matrix, reduced profit by ₹ 614 crore after taxes, compensation on property (ROA) by 15 basis points and equity (ROE) returned by 1.4 percent points. A base point is a hundred part of the percentage point.

“Markets expected to resolve the issues of property quality in this quarter, as this is a matter of concern in the past year.” “Despite the amazing valuation compared to its peers, the guidance for growth is not aggressive, which caused a disappointing quarter.”

The stock fell 6.4% during the day and closed at 5.3% low at ₹ 1,098.7.

Kant said that when a reduction of 2-3% could not be ruled out, no big waterfall is possible because the stock has not had a lot of performance in the past year.

Nifty Heft

Axis Bank weighs 8.97% on the Nifty, which is behind HDFC Bank and ICICI Bank among LEAs. He weighs the highest track gauge ninth in the top 10 stocks.

Of the 12 stocks on the bank Nifty index, 10 rejected and 2 advanced. Bank Nifty slipped 1%, while the benchmark Nifty dropped 0.6%.

Meanwhile, Axis Bank’s collection team is now making a qualitative assessment of stress accounts using credit bureau data, especially by combing multiple loans to ORROW.

The total slip for the quarter has increased by more than 70%, 8,200 crore, which, in Q1fy25, is compared to 4,793 crore. After adjusting the technical effect, the total slippage was 5,491 crores. Of these, 75% originated from an unsecured loan, while the remaining 25% came from the agricultural sector. 80% of these accounts are supported by 100% security cover.

“This is a particularly weak number, and the management comments provided some confidence in expecting a rapid change in both the quality or growth of the wealth,” said Bernstein’s Indian chief Pranab Gundalapale. “Even after adjusting the One-Policy Policy Changes, Axis Bank’s performance in this quarter significantly lags its big peers, weakening the case for a near-term re-rating.”

Brokerage Nuwama, meanwhile, downgraded to ‘hold’ Axis Bank and reduced the target price to 1,410 to 1,204, quoting margin compression and high credit costs.

“We reduce our estimates on credit growth, while the quality of the property can increase slightly,” the analysts at Nuvama said in a note, while the quality of the property can be a slight increase in the main monitor. “For a big banking franchise, stock is trading its allies at a discount, expecting to further expand the volatility of earnings and wealth quality.”

To ensure, Bernstein has set a 12 -month target price of ₹ 1,300, while the Quar Query Capital expects the stock to reach around 4,450.