Axis Bank rallies over 9% on positive management guidance

Shares of Axis Bank, India's third-biggest private sector lender by assets, jumped as much as 10 per cent to Rs 543.10 on positive management guidance

After opening weak at Rs 479 against the previous close of Rs 494.55, the stock touched intraday high of Rs 543.10 and a low of Rs 481.25. The stock ended higher by 9.37 per cent at Rs 540 on the NSE.

Negative reaction to the bank's first-ever quarterly loss gave way to positive movement on management commentary.

“The results this quarter are a reflection of the bank’s desire to accelerate NPA recognition, and get past the asset quality issues as soon as possible,” said Axis Bank Managing Director and CEO Shikha Sharma. She expressed confidence about growth in retail as well as corporate lending.

“The recognition phase of the NPA cycle is nearly complete,” said CFO Jairam Sridharan, adding that the Bank expects new NPA formation to decline significantly in 2018-19.

“There is a clear try for cleaning up the balance sheet. Confidence level of management seemed strong. They have indicated that provisioning will start normalising from second half of 2019,” said Siddharth Purohit, analyst, SMC Institutional Equities.

At least four brokerages had cut their price target on the stock. Credit Suisse has cut the price target to Rs 530 from Rs 595. It says “normalised credit costs are unlikely to be <100 bp even in FY20”.

Morgan Stanley says aggressive cleanup could help co retrace some recent weakness. At least 25 of 48 brokerages have rated the stock “buy” or higher, 14 “hold” and nine “sell” or lower; their median price target is Rs 629.50.

(With inputs from Reuters)

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