Banking Stocks decline after Series of Probes into Banks

Author: Bappaditta Jana

Intraday on Thursday, Shares of banking firms dipped, with BSE Bankex, Bank Nifty and NSE Nifty Private bank indices touching nearly a six-month low. The reason being the current series of investigations in various banks by the police and tax authorities have dampened the sentiments of investors

  • Axis Bank- Axis Bank share price slipped 1.4%, declining for the fifth consecutive day.
  • Yes Bank- Yes Bank share price fell 1.5%.
  • Federal Bank- Federal Bank share price dipped marginally by 0.8%. Both Yes Bank and Federal Bank have been slipping for the seventh day.
  • HDFC Bank- HDFC Bank share price displayed a slight fall of 0.5%. This scrip gained only seven times in the last 29 days.
  • State Bank of India- Out of the five sessions, SBI share price went downwards in four sessions. As of now, SBI share price is trading lower at 2%.
  • ICICI Bank- ICICI bank share price declined 0.7%, it fell in six out of nine trading sessions.
  • Kotak Mahindra Bank- Kotak Bank share price dropped 1%, the stock fell in seven out of nine trading sessions.

BSE Bankex, Nifty Private Bank and Nifty PSU Bank indices depreciated nearly 1% each. All three indices fell four out of five trading sessions and hit a level last seen on 29 June.

Aftermath of Demonetization
  • It is believed that the profit margins of the banks may come under pressure for the coming few quarters on expected fall in credit growth driven by reduced credit demand from small and medium sized enterprises due to demonetization.
  • The loan growth in personal loan segment (auto, credit card and other personal loans) can also come under pressure since customers are delaying any additional expenses because of the shortage of cash on account of limit on withdrawals.
  • The banks are facing continued repayments due to demonetization which is also highlighted in sharp slowdown in systemic credit growth.
  • Further, an India Today report showed that how corrupt bank officials from some of the country’s leading lenders are diverting money supplies to tax thieves.
  • Unethical behavior by banks employees through helping people converting their black money into white post-demonetization has definitely weighed on sentiments. Any step implemented by the RBI and government in the days to come would correct the banks’ stocks especially for those who remain on top of list.

For the past few weeks, amid reports of suspicious on goings at Axis Bank branches in the wake of demonetization, the ED – Enforcement Directorate and the tax department have visited 8 of the bank’s branches. The Enforcement Directorate, the tax department and the bank itself are reviewing fifty accounts. In the same period, the ED arrested a few Axis Bank employees. Axis Bank has already suspended twenty four of its employees and appointed KPMG to conduct an audit of dubious transactions.