Bank Nifty falls most in a year; ICICI Bank & BoB results drag

By: | Published: January 31, 2015 12:16 AM

CNX Bank Nifty Index registered its worst fall in a year and lost around 3.34% on Friday...

CNX Bank Nifty Index registered its worst fall in a year and lost around 3.34% on Friday. Banking index emerged as the biggest loser among sectoral indices largely due to less-than-expected Q3 earnings from Bank of Baroda and ICICI Bank.

The Bank Nifty on Tuesday opened at 20,600.65 points and touched intraday low of 19,732.45 points and closed at 19,843.75 points, down by 684.85 points or 3.34%. Analysts believe the recent rally in the Bank Nifty is not getting support from the results.

“On Friday, ICICI Bank and Bank of Baroda came out with a disappointing set of numbers. Most of the banking results so far have been in-line or marginally beating estimates. Meanwhile, valuations look a bit stretched,” said an analyst with a leading domestic brokerage.

Biggest-loser

Bank of Baroda announced its Q3 results on Friday reporting a decline of 68.12% in its net profit. A sharp surge in provisions and a spike in tax liability dragged the net profit. The stock was the worst performer in the CNX Bank Nifty Index and ended the day at Rs 192.20 or 11.49% lower.

On other hand, ICICI Bank tumbled after its bad loan provision surged. Asset quality of the lender fell as its net non-performing loans as a percentage of net advances grew 18 bps sequentially and 33 bps on a y-o-y basis. The bank’s provisions were up 41% y-o-y to Rs 979 crore in the third quarter.

ICICI Bank MD and CEO Chanda Kochhar said the positive impact on the asset quality for the banking sector generally comes with a lag with respect to what is happening in the economy. “In the economy, we have already begun seeing the right steps so I am optimistic that whatever steps the govt has taken so far are very positive and will lead to a better GDP growth in the coming quarters. This will translate into an improvement in the cashflow of the corporates and an improvement in the bank’s asset quality,” she added.

However, she said that since all these improvements come with a lag, improvements in the asset quality is expected in two to three quarters. All 12 banks in the CNX Bank Nifty Index ended the day on negative note, with most fall seen by Canara Bank (-6.10%), Bank of India (-5.41%) and Punjab National Bank (-4.95%).

The CNX PSU Bank index also lost 5.88% and ended the day at 4,046.45 points, losing 252.70 points.

Among public sector banks, losses were seen by Oriental Bank of Commerce (-5.82%), Allahabad Bank (-5.43%) and State Bank of India (-5.41%).

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