Bank Stocks Outlook for the week – 29.02.2016 to 04.03.2016
(Budget
eyed; PSU banks await recapitalisation)
( www.rupeedesk.in )
Bank
stocks will take cues from Union Budget 2016-17 (Apr-Mar),
to
be presented by Finance Minister Arun Jaitley on Monday. Public
sector
banks, which have seen their asset quality being hit sharply in Oct-
Dec,
will be eyeing the commentary of recapitalisation, as they not only
need
capital for meeting Basel-III norms, but also for provisioning
because
they continue to clean up their balance sheets to meet
the
Reserve Bank of India's March 2017 deadline.
In
light of the RBI's asset quality review, the capital committed by the
government
looks meagre, after a loss of around 129 bln rupees reported
by
11 public sector banks for Oct-Dec, as well as an impending hit on
Jan-Mar
numbers. On Thursday, rating agency Moody's Investors Service
cautioned
that the credit profiles of India's public sector banks would
worsen
if the government does not increase the quantum of capital
infusion
from current levels in the forthcoming Budget.
The
government has pledged 700 bln rupees as capital for public sector
banks
over four years, with 250 bln rupees being infused in 2015-16.
Overall,
the sector will also await Jaitley's commentary on passage of
the
Bankruptcy Code, seen as another tool aiding the process of recovery
of
banks, as well as stepping up of public investment in infrastructure.
The
Reports suggest heads of all state-owned banks, finance ministry
Officials,
including Jaitley, and RBI Governor Raghuram Rajan will be
present
at the meeting, at which they will discuss a road map on
recapitalisation
and the issue of bad loans. The impact of the increased
slippages
and higher provisioning that will be done through FY16 (2016-
2017
(Apr-Mar)) and FY17. The pressure on asset quality would remain
in
FY17 as well if the sluggish economic growth continues.
