Banking shares under pressure; Bank Nifty down 2%

Axis Bank, ICICI Bank, Yes Bank, BOB, Union Bank, SBI, PNB, BOI and Canara Bank are down 2%-8% on the NSE.

Banking shares are under pressure with most of the frontline stocks trading lower by up to 8% on the National Stock Exchange (NSE).

Axis Bank, ICICI Bank, Yes Bank, Bank of Baroda, Union Bank of India, Punjab National Bank, State Bank of India (SBI), Bank of India and Canara Bank are down 2%-8%.

At 02:28 pm, Bank Nifty, the banking share index, was the largest loser among sector indices down 2% or 412 points at 17,394 compared to 0.91% decline in the benchmark CNX Nifty.

Analysts at IIFL expect the asset quality pressures to persist for the industry given much slower-than-expected recovery in economic activity. "The dichotomy of high duress in corporate, agri and small and medium-sized enterprises (SME) portfolios and relative resilience of the retail portfolio would also continue," they said in a report.

"Public banks, in particular, could report elevated delinquency ratio of 2-4% and thus a further deterioration in their non performing loan (NPL) levels in the absence of significant sale or write-offs. Given the sharp easing in bond yields, sizeable mark-to-market (MTM) gains on the fixed income portfolio could partially offset the burden of credit cost," analysts said in a results preview note.

Among individual stocks, Axis Bank has dipped 8% to Rs 481 after the bank classified two power sector exposures worth of Rs 1,820 crore as non-performing assets (NPAs) and sold them to asset restructuring companies (ARC) for a loss of around 65%, reports suggest. CLICK HERE TO READ FULL REPORT

ICICI Bank, the second largest loser from Bank Nifty stocks, has slipped 4% to Rs 272. The bank will announce its July-September (Q2) earnings on Friday, October 30.

Analyst at Kotak Securities expects ICICI Bank to report net profit growth at 7% year on year on the back of high provisions.

Loan growth at around 14-15% but net interest margin to be stable quarter on quarter due to negligilbe base rate cut this quarter. We expect provisions to remain high led by credit costs on the back of elevated slippages, the local brokerage firm said in a report.

UCO Bank (up 3% at Rs 51) and Kotak Mahindra Bank (up 2% at Rs 672) however buck the trend and trading higher between 2%-3% on the NSE.