Axis Falls Most Among Asia Banks as Bad Debt Weigh on Profit

  • Slump in bank's shares is most in more than two months
  • Sale of stressed assets raises concern bad loans to rise

Axis Bank Ltd., India’s third-largest private-sector bank by assets, slumped the most in two months in Mumbai stock trading amid concern its soured debt will rise further.

The lender fell as much as 8.7 percent, the biggest intraday drop since Aug. 24, after reporting in a Tuesday filing that it had sold 18.5 billion rupees ($284 million) of stressed assets to asset-reconstruction companies. The stock traded 7.3 percent lower as of 3:16 p.m. local time, the sharpest decline among the Bloomberg Asia Pacific Banks Index’s 56 members.

Asset-reconstruction companies buy nonperforming and restructured loans, and sell them off after reviving struggling debtors through fund infusions and changes in business strategy. More than 5.8 billion rupees of Axis’s debt turned sour in the three months to September, the lender said Tuesday as it reported a 19 percent increase in net income for the period.

“Fresh slippages and the sale of bad loans in the quarter suggest that stressed-asset formation at the lender may continue,” Nitin Kumar, a Mumbai-based banking analyst at Prabhudas Lilladher Ltd., said by phone. “We are continuing to recommend buying the stock as long-term prospects and annual profit-growth guidance remain intact.”

The lender’s quarterly net income of 19.2 billion rupees compares with the 19.4 billion-rupee mean of 34 analyst estimates compiled by Bloomberg. Gross bad loans stood at 1.38 percent of total lending as of Sept. 30, unchanged from the previous quarter, the filing showed.

Concerns that the quality of banks’ assets will deteriorate dragged the 10-member S&P BSE India Bankex index down by 2.5 percent. ICICI Bank Ltd., the country’s largest private sector lender, fell 4.4 percent, while Yes Bank Ltd. dropped 3.1 percent.

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