homemarket NewsAxis Bank shares slump 7% after Q1 results: should you buy or sell stock?

Axis Bank shares slump 7% after Q1 results: should you buy or sell stock?

Axis Bank shares slump 7% after Q1 results: should you buy or sell stock?
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By Pranati Deva  Jul 31, 2019 10:43:02 AM IST (Published)

Shares of Axis Bank fell nearly 7 percent on Wednesday after the private lender reported higher provisioning and slippages in the June quarter (Q1FY20).

Shares of Axis Bank fell nearly 7 percent on Wednesday after the private lender reported higher provisioning and slippages in the June quarter (Q1FY20).

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The bank's profit rose 95 percent year-on-year to Rs 1,370 crore, despite a decline in asset quality. The lender had reported a profit of Rs 701 crore in Q1FY19.
Gross slippages remained higher at Rs 4,798 crore at the end of June quarter 2019, against Rs 4,337 crore in the corresponding period of the last fiscal and Rs 3,012 crore in Q4FY19. Provisions were also elevated in Q1 at Rs 3,814.6 crore, up 14.3 percent YoY and 41 percent QoQ.
Other income advanced 32.3 percent YoY to Rs 3,868.8 crore, driven by fee income growth of 26 percent and operating profit jumped 35 percent to Rs 5,892.8 crore in Q1.
Brokerages remained positive on the stock but reduced their target price on weaker asset quality in Q1.
Morgan Stanley, which is overweight on the stock, expects slippages to reduce in the second quarter.
CLSA has a 'buy' call on the stock but said that weaker asset quality drove cuts in earnings and target price. The brokerage lowered the target price to Rs 900 from Rs 1,000.
Jefferies and Citi are also bullish on the stock but cut the stock's target price post Q1 results.
According to Citi, the profit miss was on account of higher-than-expected provisions. Pre-provisioning operating profit was strong but the asset quality disappointed, it added. Citi reduced its PAT estimate by 9 percent for FY20 on expectations of higher provision costs.
The stock fell as much as 6.9 percent to Rs 657.65 per share on the BSE. At 10:20 AM, the stock was trading 3.5 percent lower at Rs 681 as compared to a 0.33 percent fall in the benchmark S&P BSE Sensex index.
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