IndusInd Bank, SBI tumble as Moody's downgrades sector outlook to negative

Besides, rating agency ICRA, too, said that it expects banks and NBFCs to see a spike in non-performing assets, which would reflected over the next few quarters.
Banking and non-bank finance companies (NBFCs), including IndusInd Bank, ICICI Bank, and State Bank of India (SBI), came under heavy selling pressure on Friday after global brokerage Moody's Investors Service changed the outlook for the banking system to negative from stable, as it expects a deterioration in banks' asset quality due to disruption in economic activity from the coronavirus outbreak.

Stating that asset quality will deteriorate, Moody's said a sharp decline in economic activity and a rise in unemployment will lead to a deterioration of household and corporate finances, which in turn will result in increases in delinquencies.

"Growing solvency stress among non-bank financial institutions will increase risks to banks' asset quality because banks have large exposures to the sector," it added. It expects deteriorating profitability and loan growth to hurt capitalisation.

Besides, rating agency ICRA, too, said that it expects banks and NBFCs to see a spike in non-performing assets (NPAs) which would reflected over the next few quarters. 

“The asset quality pressure for banks and NBFCs is expected to increase in FY21, notwithstanding the three-month moratorium provided by the Reserve bank of India (RBI) to borrowers on their loan repayments,” the rating group head (financial sector ratings) Karthik Srinivasan told reporters through a webinar. He said the actual increase in the quantum of NPAs for banks and NBFCs will be known after some more days.

At 9:43 am, Nifty Private Bank index was trading as the top loser on the NSE, down 3.13 per cent, followed by Nifty Bank index (down 3 per cent), and Nifty Public Sector Bank index (down 2.74 per cent). In comparison, the benchmark Nifty50 index was at 8,149 level, down 1.27 per cent. 

Among individual stocks, IndusInd Bank tanked 7.3 per cent to Rs 317 on the NSE. Besides, Bandhan Bank declined 5 per cent, ICICI Bank (5.6 per cent), SBI (4 per cent), and Punjab National Bank (3.6 per cent). Canara Bank, Bank of Baroda, Axis Bank, RBL Bank, HDFC Bank, and Union Bank of India slipped between 2 and 4.3 per cent.

Among these, RBL Bank hit its fresh 52-week lof of Rs 127.25 on the NSE despite clarifying that it had a strong operating performance in the March quarter with net interest margin (NIM) at an all time high. "The deposit outflow was primarily due to a pull-back from government entities, while adding that retail deposits remain stable," it said in an exchange filing.

Among the NBFC counters, HDFC, Indiabulls Housing Finance, ICICI Prudential Life Insurance, and Bajaj Holdings and Investment declined up to 3 per cent.

Last week, the Reserve Bank of India (RBI) gave a relief package for retail borrowers and businesses by announcing a three-month moratorium on payment of all term loans falling due between March 1, 2020 and May 31, 2020. With the recent cut in policy rates by RBI and small savings rates by the government, it is expected that the banks will cut their one-year deposit rates by around 50-70 bps during FY21, ICRA said.



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