The Hindu Business Line : Banking stocks tumble on expectation of weak results

BANKING sector stocks, especially PSU banks, came under heavy selling today due to perception that the financial results of most of the banks would be below market expectations mainly due to the revised norms of 90 days provisioning for NPAs.

In addition, the recent Government decision not to accept equity from the banks is also now being considered as dampener for PSU bank stocks.

Heavy selling in most of the banks was seen from BSE Bankex, which fell by 3.33 per cent. Compared to this, BSE Sensex was down by 2.34 per cent, BSE PSU Index by 3.13 per cent. Fall in other sectors indices was much lower.

Heavy selling in the shares of State Bank of India (SBI) mainly triggered the fall in bank stocks. The SBI scrip was down by 5.61 per cent at Rs 622.60 on the BSE. Other stocks that lost included PNB (down 7.59 per cent at Rs 260), OBC (down 7.87 per cent at Rs 252.85), Bank of India (down 5.95 at Rs 68.75) and Syndicate Bank (down 7.70 per cent at Rs 38.95).

Brokers said that there has been concern that the financial results for most of the banks would not be good due to the new norms, applicable from next fiscal.

"This is likely to affect the profitability of most of the older banks and the worst affected would be PSU banks," said an analyst with a domestic broking firm.

He added that several banks have started provisioning for this in the current fiscal, but the real impact would be seen when these norms comes into practice. There is also concern in the market that the treasury income of most banks would fall due to stable interest rates in the last couple of quarters.

"Possibility of further fall in interest rates look unlikely and this will reduce the treasury income," the analyst said.

Banks have been reporting good results in the last few quarters due to good treasury income.

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