Shares of Axis Bank, the country’s third-largest private bank and one of the most favoured stocks in the banking index, have fallen 7% this year, hit by a heavily a stressed third quarter which saw increased provisions toward bad loans.
On Wednesday, shares fell to Rs 415.15, down from Rs 449.80 on January 1. During the same period, the banking index also fell 10%, while the much broader Sensex, of which Axis Bank is a part, declined 6.37%.
While a fall in banking stocks has been widely expected due to rising bad loans, the quantum of fall in Axis Bank was unprecedented as it has been seen as a private bank with improved management and healthy NPA (non-performing asset or loans that do not yield returns) levels.
On January 25, in a late evening disclosure to the stock exchange, Axis Bank said its funded exposure to highly-leveraged groups — companies that have taken more debt compared to equity — has been at around 8% (about Rs 25,230 crore) of the total advances of Rs 3,15,367 crore in the third quarter.
“The leveraged groups referred to here are the eight large corporate groups that the investment community has been referring to as ‘highly leveraged’. This is not meant to be an Axis Bank-specific classification,” the filing added.
During the post earnings call, Axis Bank chief financial officer Jairam Sridharan said the challenges remain at a macroeconomic level and the industry is not seeing any pick-up in demand . “So, it is too soon to call it an end to the trouble (bad loans). We expect stress to remain at elevated levels and while we continue to remain optimistic, we continue to remain cautious in the short-term.”