Bank promoters? wealth erodes by Rs 50,000 cr

Bank promoters wealth dwindled by 32.6% during the last one year. This has taken place probably due to the global financial crisis. The market sentiment was not in favour of banks during the last one year. Due to this, promoters of banks are poorer by nearly Rs 50,000 crore on its holdings in 32 listed banks, all in the space of 12 months.

Written by PK Dey

March 26, 2009 00:14 IST

Bank promoters wealth dwindled by 32.6% (Rs 50,000 crore) during the last one year. This has taken place probably due to the global financial crisis. The market sentiment was not in favour of banks during the last one year. Due to this, promoters of banks are poorer by nearly Rs 50,000 crore on its holdings in 32 listed banks, all in the space of 12 months.

At current market prices (as on March 24, 2009) the promoter holding of shares is worth about Rs 1.03 lakh crore. But one year before (March 24, 2008) the figure was worth Rs 1.53 lakh crore.

PSB giant, State Bank of India (SBI) has lost the highest amount of wealth, with the promoter stake (govt of India) in the bank now worth Rs 12, 000 crore less than it was one year ago. From a price of Rs 1,645.65 on March 24,?08, the share of SBI is at Rs 1,034.65.

In hot pursuit is another bank, namely, Indian Bank in the PSB sector, where promoter stake was down Rs 2,733 crore during this period. Among private banks, promoter of Axis Bank has lost significant amount of wealth. The promoter of the bank lost Rs 5,363 crore during the study period. The promoter of Kotak Mahindra Bank also lost nearly Rs 5,168 crore.

The environment for bank stocks has been unfavourable, with most of them recording substantially negative returns than the market as a whole. While the BSE Sensex has decreased by 38.1% (5,818.36 points) to 9,471.04 on March 24, 2009 from 15,289.40 on March 24, 2008. BSE Bankex also lost 42.93% (3,324.68 points) to 4,419.67 from 7,744.35 during the above period. Though the share price decrease has been spectacular in some other cases, they have not translated into larger wealth erosion for the promoters given the inherently small size of these banks.

Thus, a bank such as Dena Bank has seen its price decrease by over Rs 15.20 in terms of absolute share price, but that eroded only another Rs 223 crore in wealth. A decrease of Rs 23.30 in share price in the case of Andhra Bank diminished into Rs 582 crore in wealth. Not only big bank stocks but also banks like Vijaya Bank also showed bearishness. Promoter stake of Vijaya Bank dropped by 50.48% and Karur Vysya Bank fell by 42.5%. More than 60% decrease in market capitalisation were noticed in the case of Indian Overseas Bank, DCB, J&K Bank and Yes Bank.

Only three banks, namely, Union Bank, State Bank of Travancore and State Bank of Bikaner and

Jaipur showed positive change in promoters? market cap during the study period.

This article was first uploaded on March twenty-six, twenty nine, at fourteen minutes past twelve in the am.