Banks in focus: IndusInd Bk hits 8-yr low, m-cap slips below Rs 20K cr-mark

Shares of private lender IndusInd Bank tanked as much as 30 per cent to hit an 8 year low of Rs 235.55 on the National Stock Exchange (NSE) on Tuesday after the bank's managing director and chief executive officer (MD & CEO) Romesh Sobti retired on Monday. The bank's market-capitalisation slipped below the Rs 20,000 crroe-mark and was at Rs 19,179.73 crore at 10:50 am, BSE data show.

The bank has now appointed Sumant Kathpalia as the managing director and chief executive officer. Kathpalia's appointment as MD & CEO will be placed for approval of the shareholders at the ensuing annual general meeting, the bank said in a statement. 

In February, global rating agency Moody’s had revised the outlook on IndusInd Bank’s instrument to “negative” from “stable” to account for the risk of further asset quality deterioration. However, it affirmed ratings on foreign and domestic currency deposits, on the back of a strong capital base.

Over the last few quarters, the bank has seen a deterioration in its asset quality, particularly in the corporate segment. Tight refinancing conditions for borrowers were a key trigger for the crystallization of nonperforming loans (NPLs), the agency said.

IndusInd Bank was the top loser on the Nifty Private Bank index. That apart, HDFC Bank, City Union Bank, ICICI Bank, Federal Bank, Axis Bank, Bandhan Bank, RBL Bank, and IDFC First Bank hit their respective 52-week lows, down in the range of were down 4 to 8.6 per cent on the NSE. At 11:00 am, the benchmark NIfty50 index was at 7,684.60 level, up nearly a per cent. Nifty Private Bank index, on the other hand, was trading 0.5 per cent lower, having slipped 5.4 per cent in the intra-day trade. 

The outbreak of coronavirus (Covid-19) has raised fears of fresh bad loan wave as small businesses are likely to default owing to demand disruption.  Adopting a cautious approach amid the worldwide outbreak, foreign portfolio investors (FPIs) have already pulled out a net Rs 62,612 crore from the Indian capital markets in the past one month, exchange data show.

Analysts at JP Morgan believe the current conditions call for a potential "force majeure" and the regulators will likely need to allow for a "moratorium" on retail and micro, small & medium enterprises (MSME) loans.

Whilw those at JM Financial Institutional Securities expect the earnings trajectory across the sector to moderate on the back of lower balance-sheet growth, which is usually accompanied by pressure on net interest margins (NIMs).

“We continue to favour larger banks with better economies of scale, strong liability franchises and lower exposures to weaknesses in mid-corporates and small and medium enterprises (SMEs),” the brokerage firm said in sector update.