Most bank stocks traded with strong losses on April 1, with shares of Kotak Mahindra Bank, Axis Bank, Punjab National Bank and State Bank of India falling between 5-9 percent on NSE.
The Nifty Bank index cracked as much as 4.89 percent.
Shares of Kotak Mahindra Bank, Axis Bank, Punjab National Bank, State Bank of India Bank of Baroda were the top losers in the index.
Bank stocks are falling as investors fear that the lockdown triggered by COVID-19 will have a serious impact on businesses across the sectors and banks may see a rise in their bad loans due to this.
Brokerages highlight that the lockdown of the domestic and global economies due to the COVID-19 threat will have a meaningful impact on banks’ loan-book growth.
"We have factored a lockdown of 30-45 days in our revised estimates and cut individual banks’ loan growth in FY21 by 3-5 percent and taken deterioration in asset quality. Our earnings revisions are down between 10 percent and 35 percent," said brokerage firm Phillip Capital.
The uncertain outlook and the country-wide lockdown has made banks vulnerable to a new leg of asset-quality crisis, with the most uncertain part being the lockdown period and the time that the economy would take to return to normalcy.
"We believe the impact on asset quality would be the least for HDFC Bank, Kotak Mahindra Bank, and DCB Bank, but it would be relatively high for IndusInd Bank," Phillip Capital said.
Domestic brokerage ICICI Securities, too, believes that the loan-book growth will take a hit.
"With the lack of any major private sector capex in the current fiscal, system credit growth was largely driven by the retail segment, which contributed nearly 91 percent of incremental credit during the year up to January 2020. We believe COVID-19 may further delay private capex revival and also decelerate the retail loan growth trajectory," said ICICI Securities.
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