Indian private sector lender Axis Bank’s shares closed 3.2% lower on Tuesday a day after reporting a better-than-expected profit in the quarter ended June.

The stock seesawed through the day: It touched an intraday high of Rs 584.95 on the BSE and a low of Rs 548 later, before ending the day at Rs 550.1.

The bank reported on Monday a 46% drop in net profit in the first quarter at Rs 701 crore. A Reuters poll of analysts had estimated a profit of Rs 556 crore.

The bank’s asset quality was largely stable, with slippages falling 74% on a sequential basis to Rs 4,337 crore. The gross NPA ratio stood at 6.52%, down from 6.77% in the previous quarter. The net NPA ratio too improved slightly to 3.09% from 3.4% in the fourth quarter of FY18.

Axis Bank said its provision coverage ratio had increased to 69% in the quarter ended June from 65% in the previous quarter.

Brokerages were optimistic about the bank’s performance going forward on the back of declining fresh NPAs and steady loan growth of 14% year-on-year driven by retail and SMEs.

Edelweiss in a report said the sustained retail momentum was encouraging, with advances up 21% and income from retail fees growing 18% year-on-year. “Stress crystallisation seems to be stablising, but we believe recovery will take a while,” the report said.

A Reliance Securities note said, “Axis Bank has positively surprised on asset quality and profitability front in Q1 FY19 led by sequentially lower fresh slippages, moderation in credit cost and strong sequential growth in operating profit.” It added that the improved provision coverage ratio at 69% “gives comfort on credit cost outlook”.

Citi revised its target price for Axis Bank’s stock upwards to Rs 610 from Rs 560. However, in a report, it said the bank’s coverage needs to improve further. “We expect gross slippages to continue moderating; however credit costs are likely to remain elevated as coverage needs to improve,” the report said.

CLSA too raised its target price for the stock to Rs 690 from Rs 650, adding in a note that the bank’s topline and bottomline in Q1 were ahead of its estimates, driven by NPL recoveries.

According to IIFL, there are more developments around the corner which could give a boost to the bank. Among them is clarity on the new CEO.

In a recent exchange filing, the bank’s board said it had shortlisted three candidates for the CEO post and sent them to the RBI for approval. The three names have not been disclosed by the bank.

The RBI had earlier refused to extend current CEO Shikha Sharma’s term, prompting her to request for an earlier exit in December 2018 instead of May 2021.

The reason behind RBI’s reluctance to extend Sharma’s term is reportedly the sharp increase in bad loans during her term.

Analysts are of the view that the announcement of a new CEO would drive the bank’s stock higher.

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