PSU bank shares saw massive declines in the dealing on Friday following a heavy sell-off after the global credit rating agency Standard & Poor’s warned that Indian banks’ are likely to report weak results for FY18 with shares of SBI and fraud-hit PNB nearing 52-week low. Shares of PSU banks plunged up to 8% in the afternoon deals on Friday with the stock of Canara Bank losing the most while a similar downtrend was observed in the private banks. Shares of the fifth-largest private sector lender Yes Bank dropped the most among the components of Nifty Private Bank index while HDFC Bank was the only stock which was trading in green on Friday.
Shares of big bankers such as State Bank of India, Kotak Mahindra Bank, ICICI Bank, Axis Bank, Bank of Baroda lost up to 3% today. Among the constituents of Nifty PSU Bank index, shares of Canara Bank, Andhra Bank, Bank of India, Union Bank of India, Oriental Bank of Commerce, IDBI Bank, Allahabad Bank, Syndicate Bank and Indian Bank tumbled in a range of 3% and 8%.
The stock of India’s largest bank by assets State Bank of India and country’s second-largest PSU bank Punjab National Bank came close to their respective 52-week low levels while Bank of Baroda shed more than 2.5% to a day’s low of Rs 140.95 on NSE. SBI shares dipped 2.7% to a day’s bottom of Rs 239.5 while the stock of PNB plummetted 3.43% to a day’s low of Rs 92.8 on NSE. SBI and PNB shares have marked a 52-week low of Rs 232.35 (23 March 2018) and 91.25 (12 March 2018), on NSE, respectively.
Shares of Yes Bank were the worst losers among the Nifty Bank index. The stock of Yes Bank fell as much as 3.7% to a day’s low of Rs 306.85. Other major private bank shares which also traded lower include ICICI Bank (down 2.2%), IDFC Bank (down 1.72%), Federal Bank (down 1.63%), Axis Bank (down 1.26%), IndusInd Bank (down 1.25%), RBL Bank (down 0.7%) and Kotak Mahindra Bank (down 0.3%).
Notably, shares of India’s largest bank by market cap, country’s largest private sector bank and nation’s second-largest bank by assets HDFC Bank were the only gainer among the deck of Nifty Bank index. The stock of HDFC Bank traded 0.3% higher at Rs 1,944.65.
“While recent announcements are net negative for bank results, we believe that rating downgrades are unlikely. This is because our expectations for fiscal 2018 were already low for most banks,” PTI said in a report citing Michael Puli, Analyst, S&P Global Ratings Credit. “We believe that announcements such as smoothing provisioning for mark-to-market losses on investments over four quarters will temper but not offset the immediate burden from strained performances,” S&P added. One of the main reasons for the weaker results might be due to the intervention of the Reserve Bank of India in directing banks to recognise the restructured loans following which higher provisions will be made.