ALSO READNifty PSU Bank index records second biggest fall in 2018; PNB slips 10% PSU banks trade weak after RBI's new NPA resolution PSU banks in focus; PNB, Oriental Bank, Syndicate Bank up over 5% PSU banks extend gains; Nifty PSU Bank index up 10% in six trading days PSU banks in focus; Bank of Baroda, PNB, Bank of India up over 4%
At 12:51 PM; Nifty PSU Bank index, the largest loser among sectoral indices, was trading 2.4% lower at 3,192, as compared to less than 0.6% decline in Nifty Bank, Nifty Private Bank and the benchmark index Nifty 50.
Nifty PSU Bank index hit an intra-day low of 3,190, its lowest level since October 24, 2017, a day on which the government unveiled an unprecedented Rs 2.1 trillion package for recapitalisation of the PSU banks. The index had recorded its sharpest single day rally of 30% on October 25, post announcement of recap plan.
PNB, Union Bank of India, Corporation Bank, Dena Bank, Bank of Maharashtra and Syndicate Bank hit their respective 52-week lows, while Oriental Bank of Commerce, Allahabad Bank, Andhra Bank and Bank of India were trading close to their 52-week lows on the National Stock Exchange (NSE).
In past three trading sessions Nifty PSU Bank index was down 8%, has fallen 26% from its 52-week high level of 4,335 recorded on October 26, 2017 in intra-day trade. A combined market capitalization (market-cap) of 22 PSU banks has declined by around Rs 300 billion since February 12, 2018.
PNB has seen one-fourth or Rs 96 billion market-cap erosion in three trading days after the bank on February 14, 2018, issued a letter to the stock exchanges that it had detected fraudulent and unauthorized transactions at one of its branches in Mumbai of US$ 1.77 billion.
RBI announced an overhaul of non-performing assets (NPA) resolution and provisioning late on Monday, February 12, night.
According JP Morgan, this simplifies the earlier system and, we believe, moves toward comprehensive resolution of most stressed assets by FY20. This will accelerate NPL recognition and provisioning, though the pace of provisioning is still slower than what it would be under IFRS/Ind-AS. It is incrementally negative for PSU banks.
There could be an immediate negative reaction to the PSU banks as consensus downgrades on BPS starts to kick in. Our worry is that the provisioning cycle will stay extended to FY20E under the new guidelines and this will act as a cap on re-rating for the PSU banks. To that extent, we think an IFRS implementation would be better as it helps a one-time cleanup, partially delays the capital impact and removes the uncertainty. We think downsides for the PSU banks are limited, the brokerage firm said in a report.
|Bank||25/10/2017||12/02/2018||LTP||% chg*||% chg#|
|Bank of India||188.50||144.85||128.80||-31.67||-11.08|
|Bank of Baroda||188.15||168.65||153.40||-18.47||-9.04|
|Union Bank (I)||176.30||127.40||116.75||-33.78||-8.36|
|St Bk of India||324.90||288.75||272.80||-16.04||-5.52|
|I O B||26.90||21.80||20.60||-23.42||-5.50|
|Pun. & Sind Bank||54.10||42.00||39.90||-26.25||-5.00|
|Bank of Maha||29.70||19.00||18.55||-37.54||-2.37|
|United Bank (I)||20.85||15.15||14.85||-28.78||-1.98|
|LTP : Last traded price on NSE in Rs at 12:51 PM|
|# change over February 12, 2018; * change over October 25, 2017|