'ICICI, Axis Bank fall after Fitch downgrade; CLSA sees no impact on earnings'

ICICI Bank and Axis Bank shares fell around a percent each intraday on June 4 after global rating agency Fitch downgraded both by a notch saying financial health of the private sector banks has weakened.

Axis Bank was quoting at Rs 809.90, down Rs 2.40, or 0.30 percent, and ICICI Bank was down 0.48 percent at Rs 420.80 on the BSE at 0952 hours IST.

Fitch Ratings said it has downgraded ICICI Bank as well as Axis Bank's Long-Term Issuer Default Rating (IDR) to 'BB+' from 'BBB-' and its Viability Rating to 'bb+' from 'bbb-'. The Outlook on the IDR is Stable, it said.

It has also affirmed banks' Support Rating at '3' and Support Rating Floor at 'BB+'.

BB rating indicates speculative grade while BBB points at good credit quality.

Fitch lowered its midpoint for India's operating environment to 'bb+' from 'bbb-' following a review of the banking sector's performance, particularly in the last three years, and its regulatory framework, as well as the outlook in the near term.

"We also compared India with other sovereign jurisdictions in Asia rated in the 'BBB' category including the key metrics of GDP per capita and the ease-of-doing-business ranking," it said.

The rating agency concluded the sector will perform below the average of its peers over the next one to two years in spite of its expectations of high economic growth and improving business prospects in India.

The performance of Indian banks should have largely bottomed, but the sector is still struggling with poor asset quality and weak core capitalisation, it said.

Global brokerage house, CLSA sees limited impact from revision in credit ratings by Fitch to below investment grade. "Downgrade comes on the back of Fitch’s concerns about the operating environment. While Fitch rates Axis' instruments, its ratings on ICICI Bank are unsolicited," it said.

According to the brokerage, rating downgrade may not have any material impact on their earnings but risks can arise from downgrades by other agencies.

CLSA expects banks to see 15-16 percent return on equities by FY21. It maintains buy ratings on both.

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Stocks in the news: Tata Steel, Axis Bank, Biocon, HCL Tech, CES, Yes Bank, Apcotex Industries

Here are stocks that are in the news today:

Results on April 26: Hero MotoCorp, Yes Bank, HDFC Asset Management Company, HDFC Life Insurance Company, Adarsh Plant Protect, Atul, Carborundum Universal, Classic Electricals, Deltron, DIC India, Foseco India, Hindustan Appliances, Indian Energy Exchange, Lloyds Steels Industries, Piramal Enterprises, Shikhar Leasing & Trading, Sujana Universal Industries, Supreme Petrochem

Axis Bank Q4: Profit at Rs 1,505.1 crore against loss of Rs 2,188.7 crore, net interest income rises 20.6 percent to Rs 5,705.6 crore versus Rs 4,730.5 crore YoY. Gross NPA falls at 5.26 percent versus 5.75 percent and net NPA at 2.06 percent versus 2.36 percent QoQ.

MCX Q4: Profit rises 78.6 percent at Rs 61 crore versus Rs 34 crore, revenue climbs 11.9 percent to Rs 79 crore versus Rs 71 crore YoY.

Cyient Q4: Profit jumps 90.3 percent to Rs 176 crore versus Rs 92.5 crore, revenue falls 2.1 percent to Rs 1,163 crore versus Rs 1,187 crore QoQ.

Rallis India Q4: Consolidated profit falls to Rs 1.52 crore versus Rs 19.78 crore; revenue dips to Rs 339.7 crore versus Rs 371 crore YoY.

Biocon Q4: Consolidated profit jumps to Rs 213.7 crore versus Rs 130.4 crore; revenue rises to Rs 1,528.8 crore versus Rs 1,169.5 crore YoY.

Board approved recommended issue of bonus shares by capitalisation of free reserves in the ratio of 1:1.

Tata Steel Q4: Consolidated profit falls to Rs 2,431 crore versus Rs 10,153 crore YoY but increases from Rs 2,334 crore QoQ; revenue jumps to Rs 42,424 crore versus Rs 33,705 crore YoY.

Board approved composite scheme of amalgamation of Bamnipal Steel and Tata Steel BSL into and with Tata Steel.

Apcotex Industries approved sub-division of shares and recommended payment of annual dividend of Rs 7.50 per equity share

Oriental Hotels approved issue of non-Convertible debentures or other debt securities on a private placement basis for raising funds during the financial year 2019 - 2020

HCL Technologies expands US operations with new cybersecurity center

Nestle India board declared interim dividend of Rs 23 per share for financial year 2019

Kotak Mahindra Bank: Subsidiary to sell 19.7 percent stake in Matrix Business.

Apcotex Industries approved sub-division of shares and recommended payment of annual dividend of Rs 7.50 per equity share

Oriental Hotels approved issue of non-Convertible debentures or other debt securities on a private placement basis for raising funds during the financial year 2019 - 2020

HCL Technologies expands US operations with new cybersecurity center

Nestle India board declared interim dividend of Rs 23 per share for financial year 2019

Kotak Mahindra Bank: Subsidiary to sell 19.7 percent stake in Matrix Business.

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Source: Moneycontrol

Axis Bank to announce Q4 earnings today; here's what brokerages are expecting

Axis Bank, country's third largest private sector lender, is likely to register healthy growth across parameters in March quarter driven by lower credit cost and lower slippages. The bank will declare its results on April 25.

"Lower credit cost and lowering slippages should drive earnings. NII growth to also accelerate on back of rise in MCLR and changing loan mix," Prabhudas Lilladher said.

Profit for the quarter ended March 2019 is expected to be in the range of Rs 1,500-2,300 crore against loss of Rs 2,188.7 crore in same period last year.

"Strong margins and stabilisation in the credit cost on account of lower slippages will drive the earnings with PAT growth of 40 percent QoQ at Rs 2,358 crore. Management targets to achieve 18 percent return on equity over the medium term," Narnolia said.

Motilal Oswal expects profit at Rs 1,518.5 crore for fourth quarter, thus resulting in total PAT of Rs 4,690 crore for FY19.

Net interest income, the difference between interest earned and interest expended, is seen growing at least 20 percent on healthy loan (credit) growth, with net interest margin at around 3.5 percent.

"Axis Bank in a bid to achieve its long-term target is poised to show incremental progress on operational matrix with improvement in credit growth as well as NII growth. Credit growth is expected at 17.2 percent YoY led by traction in retail as well as corporate portfolio," said ICICI Securities which expects NII growth of 19.6 percent YoY.

"Loan growth will be better than industry average given the continued momentum in retail growth and opportunistic pick up in corporate," said Edelweiss which expects NII growth at 27 percent YoY.

Pre-provision operating profit is expected to be strong with Reliance Securities, Antique Stock Broking, Edelweiss, Narnolia and Kotak seeing the growth in the range of 30-52 percent YoY.

Asset quality is expected to see further improvement in March quarter with lower slippages than the third quarter.

"Asset quality is expected to improve with the moderation in slippages ratio at 0.53 percent in Q4FY19. With high provision coverage ratio of 75 percent, credit cost is likely to be lower in Q4FY19," Narnolia said, adding gross non-performing assets may be around 5.2 percent in Q4 against 5.8 percent in Q3.

According ICICI Securities, credit cost may remain lower at 52 bps on the back of moderation in slippages.

"We expect slippages of Rs 2,400 crore (2 percent of loans) mostly from 'below investment grade book'. We expect more traction on recovery from write-off pool. No major concerns on asset quality," Kotak said.

Key issues to watch out for

- quantum of corporate slippages from BB and below list and any revision in the size of the stressed assets;

- outlook on the power assets,

- bank's strategy on retail, unsecured and business banking loans

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Source: Moneycontrol

Stocks in the news: Maruti, Axis Bank, Bharti Infratel, Indiabulls Housing, Automotive Stampings, L&T

Here are stocks that are in the news today:

Results on April 25: Maruti Suzuki India, Axis Bank, Tata Steel, Biocon, SBI Life Insurance Company, Aditya Birla Money, Cyient, GHCL, Indiabulls Ventures, MCX, Nestle India, AAR Commercial Company, Apcotex Industries, Betala Global Securities, Cochin Malabar Estates, Lloyds Metals and Energy, Oriental Hotels, PH Capital, Rallis India, Sterling Guaranty & Finance, Vesuvius India, Wendt (India)

Indiabulls Housing Finance Q4: Consolidated profit falls 6.9 percent YoY and rises 2.1 percent QoQ to Rs 1,001.4 crore; NII increases 5.8 percent to Rs 1,591 crore versus Rs 1,504 crore QoQ.

SBI: Board approves raising up to $2.5 billion through dollar notes in FY20.

Automotive Stampings Q4: Loss at Rs 3.82 crore versus loss at Rs 9.1 crore; revenue rises to Rs 139 crore versus Rs 111.9 crore YoY.

Bharti Infratel Q4: Consolidated net profit rises to Rs 608 crore versus Rs 606 crore; revenue falls 2 percent to Rs 3,600 crore versus Rs 3,662 crore YoY.

Shah Foods: Company has received a letter from Britannia Industries Limited stating that the job work contract is terminated with effect from 30/06/2019.

Persistent Systems: Company has appointed Sandeep Kalra as President - Technology Services, with effect from May 1, 2019.

FDC: Company' non-sterile manufacturing facility located at Waluj, Aurangabad, Maharashtra had recently undergone an inspection by PIC/S Malaysia and it continues to be approved. Hence, the Company continues to export oral liquid, oral powder and external powder products.

Oil India: Board approves proposal for giving its employees an opportunity to exercise the option to contribute towards the Employee Pension Scheme on the basis of actual salary, having a financial impact of approximately Rs 1,788 crore to the company.

IPCA Laboratories: To acquire Ramdev Chemical for Rs 108.5 crore.

Oriental Hotels: To consider raising funds via debt securities on April 25

Tata Elxsi: Company appoints Manoj Raghvan as CEO and MD of the company with effect from October 2.

Larsen & Toubro: Company issues NCDs aggregating to Rs 1,500 crore on April 18.

Allahabad Bank: Bank allots 162.5 crore shares worth Rs 6,900 crore to Government of India in a preferential basis.

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Source: Moneycontrol