Shares of banks were the biggest losers on Tuesday, with public and private sector banks declining in the range of 1-4%. The BSE Bankex lost 1.76% during the session to end as the worst performing sectoral index.
Shares of Federal Bank slumped 7.7% after the Kochi-based private sector lender reported a 38% fall in its third quarter net profit. Another private lender, IndusInd Bank, reported mixed third quarter results — the net profit jumped nearly 30% on a quarterly basis, while bad loan provisions increased 80.7% Y-o-Y. Shares of IndusInd Bank lost 2.68%.
Germany’s investment banking firm Deutsche Bank lowered the price targets for nine banks, including SBI and ICICI Bank, on Tuesday. Deutsche observed that the calendar year 2016 would be tough for Indian banks as loan growth still remains slow and the rate cycle has largely played out.
“RBI’s drive to build up contingencies will result in higher credit costs at times when NIMs are declining. Divergence will widen further between retail and corporate banks – retail will stand out, while corporate remains weak,” the bank said.
“Our estimate of Rs 5-6 trillion of stressed assets being standard currently implies a tough credit cycle over FY16/17F. With accelerated NPA recognition and a 30-35% correction in valuations from the top,” Japanese investment banking firm Nomura said in a note to investors.