The 2nd quarter report for July-September crashed the shares of Axis Bank as the bank reported weak earnings. What impacted the most was the huge rise in bad loans that continues to haunt the private owned firm.
Sharp fall in Share Price and Rise of Bad Loans
The share price of Axis Bank fell to a record low since August 2015 by 9.38% to Rs 465 as of today. This happened after the release of 2nd quarter report which depicted its net profit to Rs 432 crores, a profit too low than expected of Rs 1318 crore. Though the profit is 35% higher than last year yet the rise of bad loan makes the situation terrible. In last two years there has been a record rise in bad loans. This rise is constant since last nine quarters. The NPA now has risen to Rs 27, 402 crores which was Rs 22, 031 in the last quarter. The gross NPA rose to 5.9% from 5.03% of the last quarter.
More Trouble Ahead?
Its looks that the Bank has more troubles ahead. In the last two years, the bank has seen 515% rise in bad loans. What stood to Rs 4451 crore in the second quarter of FY 2016 has now risen to Rs 27, 432 crores. The bank in the initial days of FY 2017 put Rs 22, 628 crores into the watch list out which, Rs 19, 340 crores have turned into bad loans. Presently, the bank has put Rs 6052 crores under the watch list that are on the verge of turning into bad loans. These bad loans have emerged from sectors like steel, iron, telecom and power.
Should you buy Shares of Axis Bank?
Well, it would be not a good idea to presently invest in Axis Bank shares as the situation continues to deteriorate. Chief Financial Official Jairam Sridharan said that the contribution of watch list to the NPAs are coming down. He also said that he is expecting downfall in times to come which is good sign. Yet we cannot go by only one positive side because there is much at stake for the bank and the falling share is certainly going to hurt the investors.
Disclaimer: This is author’s personal opinion. Please verify the opinion with auithorised analyst before investing.