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Shares of Axis Bank lost as much as 5.21 per cent after S&P Global Ratings lowered its ratings on Axis Bank due to increased economic risks for banks operating in India. Axis Bank was trading at Rs 408.20 down 4 per cent from its previous close, while the benchmark index, Sensex fell nearly 1 per cent to 34,875.56.
‘We lowered our ratings on Axis to reflect our expectation that heightened economic risks facing India’s banking system will affect the bank’s asset quality and financial performance. While Axis’ asset quality is superior to the Indian banking sector average, its level of non-performing assets (NPAs) will likely remain high compared to international peers’, S&P said.
The ratings agency expects the bank to maintain its strong market position and adequate capitalisation. The stable outlook reflects our view that our ratings on Axis already factor in some deterioration in the bank’s asset quality and performance over the next 12 months, S&P said. The agency said economic conditions have turned adverse for Indian banks due to covid-19 and drastic efforts to curtail the spread of the virus have resulted in a sharp economic contraction. S&P could raise its ratings if the bank’s performance, particularly its asset quality, improves significantly against domestic peers and commensurate with international peers’ over the next 18 months. On Saturday, Axis Bank in an exchange filing said ‘The rating report inadvertently mentions the Bank being on CreditWatch. In this regard, S&P has confirmed that it is an editorial error and Bank is on STABLE outlook’.
From the beginning of the year, Axis Bank fell 46.22 per cent against a loss of 15.88 per cent in the benchmark index, Sensex. From the March lows, Axis Bank gained 42.28 per cent while Sensex gained 31.65 per cent.
