Banking stocks tumble on credit worries, slowdown fears

Banking stocks fell sharply on Wednesday, on worries over tight credit and fear of economic slowdown that pulled Asian stocks down for
second consecutive day.

ICICI Bank was the biggest loser, shedding nearly 9 per cent to close at Rs 397.90. Axis Bank followed with a loss of 6.82 per cent to Rs 525.65, Yes Bank was down 6 per cent to Rs 74, while Bank of India, Punjab National Bank, Kotak Bank, Bank of Baroda and HDFC Bank declined by 1.5 per cent to 3.5 per cent.

Union Bank of India, on the other hand, managed to remain positive through out the day and closed marginally up at Rs 157. The Bombay Stock Exchange’s Bankex was the second biggest sectoral loser of the day, falling by 4.38 per cent.

According to banking analysts, top lenders including ICICI Bank and State Bank of India were under selling pressure on concerns that tight credit markets could hurt their profitability and there could be considerable rise in bad loans. However, the vigilant approach of the banking regulator may help the banks at some level, though the tight liquidity conditions are likely to continue for at least next two quarters.

“We believe the transmission of the central bank's rapid monetary easing to the real economy is still a few quarters away, putting pressure on economic growth. As a natural fallout, banks are likely to face risk on credit quality, especially in the SME and corporate segments, as the full impact of lower economic growth filters through,” said Nilesh Parikh of Reliance Equities.

Reliance Equities had quoted HDFC Bank as a top pick in the sector on account of its well-balanced business performance while for ICICI Bank it said there is no near-term trigger or potential for better core performance.

“ICICI Bank will witness the biggest delta in its stock price once global credit market and domestic capital markets return to normalcy. Given the near term challenges on asset quality, we initiate with a hold on Axis Bank and SBI given their aggressive growth strategy,” it added

Source: EconomicTimes