India's Axis Bank tumbles on disappointing June quarter, asset quality woes
The stock was on track for its worst day in six months and was the top loser on Nifty Bank (.NSEBANK), opens new tab and Nifty Private Bank (.NIFPVTBNK), opens new tab indexes.
It also dropped the most on benchmark Nifty 50 (.NSEI), opens new tab, which was trading flat.
India's fourth-largest private lender by market value reported a surprise lower quarterly profit drop on Thursday, as its bad loans surged after a one-time industry benchmarking exercise. Its net interest margin also contracted to 3.8% from 4.05%.
Systematix said margins would remain a drag in the second quarter as well, as the bank needs to fully take in the impact of the central bank's repo rate cut.
When rates are lowered, lenders typically pass on the advantage to borrowers first and only later cut deposit rates, which temporarily squeezes their margins.
The lender said it made changes to asset classification norms, after it found an "odd bank" following a criterion more stringent than it. However, it did not name the "odd bank" or give details on the benchmarking exercise.
The bank's new asset recognition norms weighed on asset quality, with high credit costs adversely impacting the profit, BOBCaps analysts said.
Macquarie analysts said the results raised "more questions than answers", adding that the bank's credit costs were higher than its private peers, even after adjusting for the one-time accounting change.
Session's losses trimmed Axis Bank's year-to-date gains to 4.3%, compared with an 11% and 12% climb in the banks index and private banks index. Benchmark Nifty 50 has gained 6% so far in 2025.
Larger rivals HDFC Bank (HDBK.NS), opens new tab and ICICI Bank (ICBK.NS), opens new tab will report their June-quarter results on Saturday.
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