Bank stocks edge lower as S&P says asset quality to remain under pressure

Bank stocks edged lower at 12:02 IST on BSE after ratings agency Standard & Poor's reportedly said yesterday, 22 March 2016 that Indian banks' asset quality and capitalisation are likely to remain under pressure in the next 12 months.

Among public sector banks, Central Bank of India (down 2.32% at Rs 71.65), Bank of Baroda (down 1.6% at Rs 144.10), Union Bank of India (down 1.57% at Rs 128.30), Punjab National Bank (down 1.28% at Rs 84.80), Bank of India (down 0.77% at Rs 97.20) and State Bank of India (down 0.48% at Rs 196.45) edged lower. IDBI Bank (up 3.26%) edged higher.

Among private sector banks, HDFC Bank (down 1.1% at Rs 1,042.10), Axis Bank (down 0.73% at Rs 437.45) and ICICI Bank (down 0.68% at Rs 232.10) edged lower. Yes Bank (up 1.24% at Rs 844.50) and IndusInd Bank (up 0.63% at Rs 933.20) edged higher.

The S&P BSE Bankex index was down 66.40 points or 0.37% at 18,087.03. It outperformed the Sensex which was down 123.54 points or 0.49% at 25,206.95.

The S&P BSE Bankex index had outperformed the market over the past one month till 22 March 2016, surging 11.01% compared with Sensex's 6.48% rise. The index had, however, underperformed the market in past one quarter, declining 5.09% as against Sensex's 1.02% fall.

Standard & Poor's (S&P) reportedly said that Indian banks' asset quality and capitalisation are likely to remain under pressure in the next 12 months mainly because of tepid industrial activity and high leverage by some corporates. S&P expects banks' credit costs to remain high because of under provisioning on their existing gross non-performing assets (NPAs), weak corporate performance, continuing slippages, Reserve Bank of India's review of banks' asset quality, and higher provisioning on strategic debt restructuring loans, as per reports.

Kotak Mahindra Bank (KMBL) was off 0.1% at Rs 663.40. The stock hit a high of Rs 675.60 and a low of Rs 661.45 so far during the day. The bank today, 23 March 2016, announced that the Reserve Bank of India has intimated the bank that following an approval from the Foreign Investment Promotion Board, the central bank has taken on its record the foreign investment limit in Kotak Mahindra Bank to be at 55% of the bank's equity capital. The ceiling on investment in the bank's shares by foreign institutional investors, foreign portfolio investors (FPIs) and qualified foreign investors (QFIs) remains at 40% of equity capital.

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