Axis Bank's positive commentary on bad loans spurs investor interest even as lender reports first ever quarterly loss of Rs 2,189 crore

The Axis Bank stock rose in Friday trade on positive management commentary that recognition of bad loans in this cycle was nearly complete.  The private sector lender also sees bad loan in the current fiscal to be lower than the previous year which led to positive sentiment around the stock. The lender reported its first ever quarterly loss of Rs 2,189 crore in the January-March quarter of the last fiscal and made heavy provisions against bad loans.

A Bloomberg poll of 15 analysts had expected a net profit of Rs 662.30 crore. At 1300 hours, the stock was trading nearly 5 percent higher at 518 level on BSE.  The stock was the top gainer on Sensex and Nifty. On Nifty, the stock rose 5.14% to 519.15.

It was the most traded stock on BSE by volume. The turnover rose to Rs 8901 lakh on BSE. The stock saw 17,226 trades on BSE.

Provisions rose to Rs 7,180 crore ($1.1 billion) in Q4 from Rs 2,810 crore the previous quarter as an additional Rs 16,500 crore of fresh defaults were identified after the implementation of tighter regulations, the bank said.

The lender's so-called watchlist shrank to 0.1% of its total loan book from 1.3% the previous quarter and 2.5% the previous financial year. The watchlist created after the RBI's asset quality review, came down to Rs 428 crore at the end of March and the book has been closed to be integrated with the overall one, said chief financial officer Jairam Sridharan in a post-earnings call.

Sridharan said bad loan formations in the current fiscal will be lower than the previous year.

Among other positives, the bank's loan growth stood healthy at 18% YoY (+23% YoY in retail; +20% YoY in SME). Deposit base rose much faster off a sequentially low base at 11% QoQ.

On Thursday, the bank said net profit for the financial year 2017-18 shrunk 93 per cent year-on-year (YoY) to end at Rs 276 crore.

The bank's net interest income in the March quarter stood flat on YoY basis at Rs 4,730 crore.

Axis Bank also skipped on distributing dividend due to the surprise loss in the March quarter. "After making mandatory appropriations to Statutory Reserve, Investment Reserve and Capital Reserve, no profits are available for distribution as dividend for the year ended 31st March 2018. Accordingly, no dividend has been recommended by the Board of Directors for the year ended 31st March 2018," the lender said in its statement.

The asset quality of Axis Bank also worsened as its gross non-performing assets (NPAs) reached 6.77 per cent during the fourth quarter of FY18. The same was at 5.28 per cent in the December quarter last fiscal, and 5.04 per cent in the corresponding period last year. The private lender saw its net NPAs rise to 3.40 per cent from 2.56 per cent in the previous quarter and 2.11 per cent in the quarter ended March 31, 2017. Axis Bank's gross NPAs stood at Rs 34,249 crore and its net NPAs at Rs 16,592 crore.