Bank stocks rally post Supreme Court verdict in loan moratorium case

Bank stocks, on Tuesday, rebounded from their intra-day lows on the bourses after the Supreme Court rejected the pleas from various trade associations and corporate bodies to extend the six-month loan moratorium period offered by the Reserve Bank of India (RBI), adding that a complete waiver of interest during the moratorium cannot be granted either.

The SC said that no direction can be issued to the government or RBI to announce any particular financial packages or reliefs, and held that it cannot issue directions to provide relief to particular sectors over and above others.

State-owned banks were the top gainers with the Nifty PSU Bank index rallying as much as 3.6 per cent, while Nifty Bank and Nifty Private Bank indices were up 1.7 per cent and 1.6 per cent, respectively. In comparison, the benchmark Nifty50 index was up 0.68 per cent in intra-day trade.

However, indices partially pared their gains as the apex court directed that there shall be no interest on interest or penal interest on any amount during the loan moratorium from any borrower.

At 11:20 am, Nifty PSU Bank index was up 2.5 per cent, while Nifty Bank and Nifty Private Bank index were up 1.3 per cent, against 0.51 per cent rise in the Nifty50 index.

Among individual stocks, State Bank India (SBI) was trading 1.5 per cent higher at Rs 372.50, after hitting high of Rs 377.95 in intra-day trade on the NSE. and were up 7 per cent each, while Bank of Baroda, Central Bank of India, Indian Bank, Canara Bank, Union Bank of India and Punjab National Bank were up in the range of 2 per cent to 3 per cent.

Bandhan Bank, HDFC Bank, ICICI Bank, RBL Bank, IDFC First Bank, IndusInd Bank and Federal Bank from the private sectors were trading over 1 per cent higher, each.

Meanwhile, according to Motilal Oswal Securities, the banking sector is entering a golden period; with the focus shifting from asset quality issues towards strong growth opportunities, market share gains, and earnings pendulum swings towards decade high RoEs. Large Banks have prudently provided for anticipated loan losses and raised the highest amount of capital, thus equipping them for a sustained turnaround. Private Banks are well placed to accelerate market share gains.

After the perceived severe impact of the COVID-19 pandemic over 1HFY21, asset quality was much better than expected, led by an improvement in collection efficiency (around 97 per cent for large Banks), controlled slippages (pro forma), and lower restructuring (v/s earlier indicated), the brokerage firm said in financial sector update.

Although slippages are likely to remain elevated over the coming quarters, pro forma asset quality as of Dec’20 indicates a curtailed impact. Most companies have already provided for the likely rise in slippages and carry additional provision buffers. We expect FY22E to be a normalized year in terms of credit costs, which would provide a significant thrust to earnings, more so for corporate-focused Banks, it said.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Source link