Bank stocks in focus on good operational show by Federal, HDFC Bank in Q2

Bank stocks were in focus at the bourses on Monday and rallied by up to 6 per cent, after two private sector banks - HDFC Bank and Federal Bank - reported a healthy operational performance for July-September 2020 quarter of the current fiscal (Q2FY21).

ICICI Bank, Axis Bank Federal Bank, Bandhan Bank and RBL Bank from the Nifty Bank index were up more than 4 per cent on the National Stock Exchange (NSE). State Bank of India (SBI), HDFC Bank, IndusInd Bank, City Union Bank, IDFC First Bank and Punjab National Bank (PNB) were up in the range of 1 per cent to 3 per cent.

At 10:14 am; Nifty Bank, Nifty Private Bank and Nifty PSU Bank indices were up 2.6 per cent each, as against 0.95 per cent gain in the benchmark Nifty50 index.

Shares of HDFC Bank were up 3 per cent to Rs 1,235 in intra-day trade after the country's largest private lender clocked an 18.4 per cent year-on-year (YoY) growth in its net profit on substantial growth in interest earnings and other income. That apart, the lender clocked stellar improvement in asset quality. The gross non-performing assets (NPAs) ratio to gross advances declined to 1.08 per cent in Q2FY21, from 1.38 per cent in Q2 FY20. The GNPAs were at 1.36 per cent at end of Q1FY21.

"Strong growth along with largely stable asset quality and standstill asset norms bodes well for HDFC Bank. Furthermore, higher collection efficiency at around 97 per cent in September 2020 would make restructuring non-meaningful," ICICI Securities said in a note.

"HDFC Bank has delivered strong growth amid a challenging macro environment, and business momentum is swiftly moving toward pre-COVID levels. Furthermore, the bank's operating performance remains steady, aided by healthy revenue growth and controlled opex," noted analysts at Motilal Oswal Financial Services in a post result update.

Meanwhile, shares of Federal Bank surged 6 per cent to Rs 55.65 on the BSE, after the bank reported a healthy operational performance led by stable business growth. The asset quality of the bank improved during the quarter. The gross NPAs declined to 2.84 per cent in Q2FY21, from 3.07 per cent in Q2 FY20. The GNPAs were at 2.96 per cent at end of Q1FY21. The net NPAs were at 0.99 per cent in September 2020, down from 1.59 per cent in September 2019. Its net NPAs were at 1.22 per cent in June 2020 (Q1FY21).

Operational performance stayed strong led by healthy other income growth, steady opex. However, higher provisioning impacted profit after tax at Rs 308 crore, down 36.2 per cent YoY. Net interest income grew 23 per cent YoY, to Rs 1,380 crore in Q2FY21.