Banks extend decline; IndusInd, RBL, Bandhan Bank tank over 10% in 1 week

In the past one week, Nifty Bank index has slipped 6 per cent as against 3.3 per cent fall in the Nifty50 index

Banking shares continued to be under pressure and were trading lower for the fifth straight day after Financial Crimes Enforcement Network (FinCEN) leaks alleged that almost all Indian banks could be part of the suspicious transactions.

Bandhan Bank, IndusInd Bank and Axis Bank were down around 4 per cent, while RBL Bank, Federal Bank, Punjab National Bank, IDFC First Bank, Bank of Baroda and HDFC Bank skid between 1 per cent and 3 per cent on the National Stock Exchange (NSE) on Tuesday.

At 02:50 pm, Nifty Bank index -- which had hit an intra-day low of 2 per cent to trade at 20,958 -- was down 1.5 per cent, as compared to 0.86 per cent decline in the Nifty 50 index. In the past one week, Nifty Bank index has slipped 6 per cent, as against 3.3 per cent fall in the benchmark index. IndusInd Bank has tanked 15 per cent while Bandhan Bank has plunged 12 per cent. RBL Bank and Federal Bank, meanwhile, have slipped 11 per cent each during the week.

According to a Business Standard report, between 2010 and 2017, several transactions went through Indian banks that were flagged as top-secret ‘Susp­icious Activity Reports’ or SARs by the US Treasury Department’s FinCEN for suspected money laundering, terror financing, drug dealing, and financial fraud.

Such transactions were part of $2 trillion suspicious transfers flagged by the top US authority in the FinCEN list. The International Consortium of Investigative Journalism (ICIJ) obtained the data that traces these global transactions, which happened between 1999 and 2017. Part of this data was released by the consortium on its website. CLICK HERE FORE REPORT

Meanwhile, last week, rating agency India Ratings and Research (Ind-Ra) revised its outlook on the banking sector to Negative for 2HFY21 from Stable. This was on expected spike in stressed assets, higher credit costs, weaker earnings on account of interest reversals and lower fee income, and muted growth prospects in the wake of the measures taken to contain the spread of Covid-19.

Additionally, capital buffers for most public sector banks (PSBs) remain modest, As per Ind-Ra’s bear case, the spike in stressed assets due to pandemic is expected to double the credit costs for banking system than estimated pre-Covid-19 levels for FY21.

BANK	LATEST	1-WK BEFORE	LOSS(%)
INDUSIND BANK	539.90	633.50	-14.8
BANDHAN BANK	266.55	303.55	-12.2
RBL BANK	164.90	185.35	-11.0
FEDERAL BANK	48.55	54.25	-10.5
AXIS BANK	409.10	449.65	-9.0
ST BK OF INDIA	185.00	200.15	-7.6
CITY UNION BANK	137.20	145.65	-5.8
ICICI BANK	351.80	371.45	-5.3