PSU banks fall second straight day; CNX PSU Index dips 6% in two days

Allahabad Bank, Andhra Bank, Canara Bank, Union Bank, PNB and IOB were down more than 4% each on National Stock Exchange.

Shares of public sector undertakings (PSU) banks are under pressure for the second straight day on concerns of asset quality on account of their advances to companies whose coal block allocations have been cancelled by the Supreme Court.

Allahabad Bank, Andhra Bank, Canara Bank, Union Bank of India, Punjab National Bank and Indian Overseas Bank are down more than 4% each, while Syndicate Bank, Oriental Bank of Commerce, Bank of India, IDBI Bank and Bank of Baroda are down 2-4% on National Stock Exchange (NSE). Most of these banks had fallen between 2-5% on Wednesday.

The NSE CNX PSU Bank index, the largest loser among sectoral indices, is down 2.7% compared to 0.18% decline in benchmark CNX Nifty at 1005 hours. CNX PSU Bank index has plunged nearly 6% in past two trading sessions.

On September 24, the Supreme Court cancelled all coal block allocations except for government-run blocks that operate on a non-JV basis. The public sector banks have the high exposure to the power and iron & steel sectors.

According to Business Standard reports, among banks, Punjab National Bank has the highest exposure (2.6% of total advances, including non-fund based) to the mining sector, while Canara Bank's exposure to the energy sector is the highest (12.6%).

According to brokerage firm Anand Rathi Financial Services, the Supreme Court order will hit Andhra Bank the hardest, as the power sector accounts for 13.4% of its total industry loan book, followed by UCO Bank (13.1%) and Corporation Bank (11.9%). Private banks have the least exposure to this sector, with ICICI Bank (2.4%), HDFC Bank (2.4%) and DCB Bank (1.3%) at the bottom of the list, added report.

Banks which have funded the companies (whose allocations stand cancelled) would not have material impact as these companies would still make profits and would be in a position to repay the loans. However, we would await further clarity on financial exposure of the banks towards the respective companies, said analyst at Angel Broking in a client note.