More slippages from watch list likely, says Axis Bank CEO Amitabh Chaudhry

Given the current economic scenario, Axis Bank is likely to witness higher slippages from its pool of stressed assets going forward, the bank’s MD & CEO Amitabh Chaudhry said.

Slowing economy, funding issues faced by non-banking finance companies (NBFCs) and housing finance companies, promoters facing legal issues and others under the lens of enforcement agencies are the several challenges that may have a bearing on the banking sector.

“All these create significant uncertainties on the banking business. If left unsettled all these factors will eventually have a bearing on stress in the lending pool of banks. Also, resolution stress accounts has not seen any material progress,” Chaudhry said in an earnings call after announcing the bank's Q2 earnings on October 22.

He added that considerable lack of resolution in large cases under the Insolvency & Bankruptcy Act is delaying the recovery cycle. “Early news on pre-festival sales is also mixed,” he said.

Chaudhry said the bank’s slippage numbers have remained elevated in the second quarter, reflecting the situation in corporate lending. "Almost all slippages have come from the previously disclosed stressed accounts. Moreover, the current environment is not enabling a quick rundown. So to that extent, we expect slippages from this stock to remain elevated,” he stated.

The bank on October 22 reported a net loss of Rs 112.1 crore, posting below than expected Q2 FY20 earnings.

The management said it had incurred a loss in Q2 due to a one-time tax impact of Rs 2,138 crore on change in the corporate tax rate. "Excluding of this extraordinary item, PAT would have been Rs 2,026 crore, up 157 percent year-on-year (YoY)," Axis Bank said in a statement.

Gross non-performing assets stood at 5.03 percent against 5.25 percent quarter-on-quarter (QoQ) while net NPA came in at 1.99 percent against 2.04 percent QoQ.

The bank reported total slippages of Rs 4,983 crore against Rs 4,798 crore (QoQ). Net slippages stood at Rs 2,770 crore against Rs 2,621 crore (QoQ).