What went wrong in axis bank in 2017

 In 2017, Axis Bank faced multiple challenges that affected its performance and reputation. Here are some key issues that emerged during that period:

1. Rising Non-Performing Assets (NPAs):

• The bank reported a sharp increase in NPAs, leading to concerns over asset quality.
• Gross NPAs surged from 5.22% in March 2017 to 5.99% in September 2017, reflecting stress in corporate loans.
• The bank had significant exposure to large stressed corporate accounts that turned bad.

2. Weak Financial Performance:

• In Q2 FY18 (July-September 2017), Axis Bank reported an 83% decline in net profit due to higher provisioning for bad loans.
• Provisions for NPAs rose sharply, affecting profitability.

3. RBI’s Divergence Report on NPAs:

• The Reserve Bank of India (RBI) found discrepancies in Axis Bank’s reported bad loans versus its actual stressed assets.
• The divergence in NPAs (difference between RBI's assessment and the bank's reported numbers) was over ₹5,600 crore for FY17.
• This raised concerns about under-reporting of bad loans and governance issues.

4. Management & Leadership Issues:

• CEO Shikha Sharma's leadership came under scrutiny due to rising NPAs and regulatory issues.
• In December 2017, the bank’s board approved her reappointment for three years, but RBI later advised against extending her tenure in 2018.

5. Allegations of Fraud and Irregularities:

• Post demonetization (November 2016), Axis Bank came under scrutiny for alleged money laundering activities.
• Several bank employees were caught misusing banking channels to launder unaccounted cash.
• While these incidents occurred in late 2016, their impact and regulatory scrutiny extended into 2017.

6. Stock Price Impact:

• Due to these issues, Axis Bank’s stock price remained under pressure throughout 2017.
• Investors were concerned about earnings volatility, asset quality, and management effectiveness.

Conclusion:

Axis Bank in 2017 struggled with a high level of bad loans, regulatory concerns over NPA divergence, governance issues, and fraud allegations. These challenges significantly impacted its financials, stock performance, and management stability. However, the bank later undertook corrective measures, including strengthening risk management and corporate governance.

The divergence that RBI uncovered was 10% of networth of Axis bank in fy 17.

Even in such crisis Axis Bank got 1.9 times PBV at the lowest