Bank Stocks Outlook for the week – 03 to 07.07.2017
Bank Stocks Outlook for the week – 03 to 07.07.2017
( www.rupeedesk.in )
The downward bias for bank stocks is seen continuing in the coming week as the overhanging stress
from the proposed merger of public sector bank continues to weigh on the sector. The government
has identified four large state-owned banks--Punjab National Bank, Bank of Baroda, Canara Bank
and Bank of India--to take over Vijaya Bank, Syndicate Bank, Union Bank, Dena Bank, United Bank of India, and UCO Bank. This is clearly negative for the large state-owned banks. These banks have material book value hits coming on their own balance sheet from increased provisioning. On top of that, if they are asked to take over weak banks it will hamper any chance of quick recovery. We have an underweight rating on all public sector banks in our coverage. On a relative basis, private corporate banks are better placed," Morgan Stanley Research said in a report. This week, tracking broader indices, most bank stocks ended in the red, especially after the Reserve Bank of India asked banks to provide 50-100% on stressed cases that are being referred to the Insolvency and Bankruptcy Code. Yesterday, media reports suggested SBI has written to the finance ministry asking it to ease the
provisioning norms as it will eat into lenders' profit margins. We expect provisioning to increase
significantly going forward, given the pile-up of stressed assets, which should negatively impact
earnings of corporate banks.
Source : Cogencis Information Services Ltd.
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Bank Stocks Outlook for the week – 03 to 07.07.2017
( www.rupeedesk.in )
The downward bias for bank stocks is seen continuing in the coming week as the overhanging stress
from the proposed merger of public sector bank continues to weigh on the sector. The government
has identified four large state-owned banks--Punjab National Bank, Bank of Baroda, Canara Bank
and Bank of India--to take over Vijaya Bank, Syndicate Bank, Union Bank, Dena Bank, United Bank of India, and UCO Bank. This is clearly negative for the large state-owned banks. These banks have material book value hits coming on their own balance sheet from increased provisioning. On top of that, if they are asked to take over weak banks it will hamper any chance of quick recovery. We have an underweight rating on all public sector banks in our coverage. On a relative basis, private corporate banks are better placed," Morgan Stanley Research said in a report. This week, tracking broader indices, most bank stocks ended in the red, especially after the Reserve Bank of India asked banks to provide 50-100% on stressed cases that are being referred to the Insolvency and Bankruptcy Code. Yesterday, media reports suggested SBI has written to the finance ministry asking it to ease the
provisioning norms as it will eat into lenders' profit margins. We expect provisioning to increase
significantly going forward, given the pile-up of stressed assets, which should negatively impact
earnings of corporate banks.
Source : Cogencis Information Services Ltd.
