Axis Bank shares plunge most in over two years on Q1 profit miss

Axis Bank shares: Shares of Axis Bank, the country’s leading private sector lender, saw a drop of 6.37 per cent to hit an intraday low of Rs 1,160.75, marking their worst single-day performance in over two years since October 27, 2021. The decline followed the bank's announcement of first-quarter profits that fell short of market expectations.

Axis Bank's net profit increased by 4 per cent year-over-year to Rs 6,034.64 crore for the June quarter, compared to Rs 5,797 crore in the same period last year. However, this result was below analysts' average estimate of Rs 6,450 crore, as per LSEG data. The primary reason for the profit miss was a sharp rise in provisions for potential bad loans, which nearly doubled to Rs 2,039 crore from Rs 1,034 crore in the June quarter of the previous year.

The Mumbai-based lender's net interest income (NII), which is the difference between interest earned on loans and interest paid on deposits, rose by 12.45 per cent to Rs 13,448 crore from Rs 11,959 crore a year ago. Despite this growth, the bank's asset quality deteriorated, with the gross non-performing assets (NPA) ratio increasing to 1.54 per cent at the end of June from 1.43 per cent in the previous quarter.

Puneet Sharma, Chief Financial Officer of Axis Bank, attributed the NPA increase to seasonality in the retail agriculture business. "In certain parts of the unsecured portfolio, we are seeing credit costs rise, but they remain well within our risk guardrail," Sharma added.

In terms of growth, Axis Bank's loans grew by 14 per cent year-over-year (2 per cent quarter-over-quarter), while deposits grew by 13 per cent year-over-year but declined by 1 per cent quarter-over-quarter. The credit-to-deposit (C/D) ratio increased to 92 per cent, and the current account savings account (CASA) mix stood at 42 per cent.

Fresh slippages were reported at Rs 4,793 crore compared to Rs 3,990 crore in the first quarter of the previous financial year, leading to a quarter-over-quarter increase in GNPA and NNPA ratios by 11 basis points and 3 basis points, respectively, to 1.54 per cent and 0.34 per cent. The provision coverage ratio (PCR) remained stable at 78 per cent. Motilal Oswal, a brokerage firm, has revised its earnings estimates for Axis Bank, reducing them by 5.6 per cent for FY25 and 7.8 per cent for FY26. The firm has also moderated its growth assumptions and factored in higher credit costs, resulting in an estimated return on assets (RoA) of 1.7 per cent and return on equity (RoE) of 16.2 per cent for FY26. The brokerage reiterated its 'Neutral' rating on Axis Bank with a revised target price of Rs 1,175.

The rise in net credit costs to 97 basis points was attributed to seasonality and lower recoveries and upgrades, reflecting timing differences rather than full-year credit costs. Excluding these timing differences, the effective credit costs would be 67 basis points. Restructured loans edged lower to 0.14 per cent of net advances.

As of 10:39 am, Axis Bank shares traded 6.42 per cent lower at Rs 1,160.20. The stock was top loser in both Sensex and Nifty 50 basket of shares.