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Bank stocks are seen trading in a narrow range with a positive bias in the coming week, with the market eyeing the asset quality performance of banks that report their Jan-Mar earnings. Fitch Ratings expects Indian banks' restructured loans to keep rising faster than non-performing loans. Non-performing loan accretion is likely to slow thanks to the central bank's cumulative monetary easing in 2012-13 (Apr-Mar). The rating agency estimates gross non-performing loans to approach 4.2% for financial year 2012-13 and 4.4% in financial year 2013-14. Bank of Baroda, Bank of India, United Bank of India, Karnataka Bank, Jammu & Kashmir Bank and Dhanlaxmi Bank are the major banks that will declare Jan-Mar and 2012-13 (Apr-Mar) earnings this week. So far, the private banks have shown strong profit performance and stable asset quality while the trend for state-owned banks has remained mixed.
Central Bank reported healthy set of numbers for the quarter-ended Mar 31, as it posted net profit of 1.69 bln rupees as against a loss of 1.05 bln rupees in Jan-Mar 2012. Key take aways from the Central Bank result were healthy NII (net interest income) growth, strong performance on the non-interest income front and sequential improvement in the asset quality front after witnessing continued stress for several quarters. Union Bank's operating performance has remained under pressure in FY12/FY13; however, we expect this to improve with a pick-up in GDP (gross domestic product) growth and declining interest rates. PNB's restructuring was also high at 64.7 bln rupees, but largely driven by incremental disbursements to state electricity boards. While valuations are inexpensive, core profitability would remain under pressure.
