'Demonetisation Impact': Axis Bank's Q3 Net Plunges 73%, Shares Tank

Shares of Axis Bank, India's third-biggest private sector bank by assets, fell more than 7 per cent on Friday after the lender reported 73 per cent decline in its net profit for the October-December quarter. 

Axis Bank reported a net profit of Rs 580 crore compared to Rs 2,175 crore a year earlier, as its provisions for bad loans surged over 400 per cent annually to Rs 3,796 crore compared to Rs 713 crore last year. Analysts polled by NDTV Profit had estimated its net profit at Rs 900 crore. 

Axis Bank's gross non-performing assets (GNPA) as a percentage of total advances rose to 5.22 per cent as compared to 4.17 per cent in the September quarter. Meanwhile, its net non-performing assets, which are GNPAs minus provisions, rose 16 basis points sequentially to 2.18 per cent of advances. 

Axis Bank's slippages or fresh loans that turned bad in Q3 came in at Rs 4,560 crore, which was in line with estimates. However, its slippages from non-watch list increased to Rs 1,900 crore compared to nearly Rs 1,500 crore in the September quarter, which is "disappointing", said Edelweiss in a report. 

Meanwhile, Axis Bank's interest income and advances took a hit due to demonetisation in Q3, Edelweiss said. Its net interest income, which is the excess of interest earned on advances over interest paid on deposits, increased 4 per cent to Rs 4,334 crore. 

Its fee income fell 4 per cent annually to Rs 1,805 crore in Q3 compared to Rs 1,884.7 crore last year. 

"Demonetisation seemed to weigh on the bank's core performance. These are challenging times for Axis Bank, manifested in temporary lull in earnings," said Edelweiss. 

However, the brokerage has maintained its "buy" rating on Axis Bank with a target price of Rs 570 as it believes that the fall in net profit is "temporary" and it is likely to bounce back going ahead. 

Axis Bank shares closed 7.26 per cent lower at Rs 448.7 apiece compared to 1 per cent drop in the broader Nifty.