Shares of private sector banks were under pressure with AU Small Finance Bank (SFB), RBL Bank and Bandhan Bank slipping as much as 9% due to profitability concerns. As of 10:09 a.m., the S&P BSE Private Bank and Nifty Private Bank indices were down 1% each, compared to a 0.6% decline on the benchmarks, S&P BSE Sensex and Nifty50.
Among individual stocks, AU SFB fell 9% to Rs 565.10 amid heavy volumes. Over the past month, the stock has underperformed the market, falling 12% against a 4% decline in benchmarks. Over-the-counter trading volumes nearly doubled with a combined total of 3.2 million shares changing hands on the NSE and BSE.
With the decline of the last month, AU SFB fell by 23% from its 52-week high of Rs 732.90 reached on April 21, 2022. The bank had issued free shares at a ratio of 1:1.
HDFC Securities analysts say AU SFB’s continued investments in people, digital, branding, products and distribution to build a future-ready bank may hurt its profitability in the medium term. term.
“The bank has continued to increase investment in its franchise building blocks and new asset classes, which are likely to drag mid-term profitability metrics (opex to assets at around 4%). also draw investors’ attention to the bank’s historically low LGDs which have so far relied on a highly secure wallet, but that is changing,” the brokerage said in its fourth quarter earnings update. trimester.
Shares of RBL Bank slipped 5% to Rs 84.80 and plunged 26% over the past month. The stock had hit a 52-week low at Rs 74.15 on June 20, 2022. On June 11, the Reserve Bank of India (RBI) approved the appointment of R Subramaniakumar as Managing Director and Chief Executive Officer (MD and CEO) of the private sector lender.
Previously, Subramaniakumar was the former managing director and managing director of state-owned Indian Overseas Bank. He was also appointed as a director of Dewan Housing Finance Co Ltd after the mortgage financier’s board was replaced.
According to Kotak Institutional Equities analysts, RBL Bank addressed a concern, however, the bank’s strategy issues given its reliance on high-yield product segments, employee retention and recovery and growth ratios remain unclear.
Shares of Bandhan Bank fell 3% to Rs 267.70 on BSE in intraday trading. The stock has corrected 23% from its 52-week high of Rs 349.50 on May 17, 2022.
Bandhan Bank’s market price has corrected sharply in recent days on concerns over its Assam portfolio, with 85-90% of the state’s total districts affected by severe flooding. Given that Assam accounts for about 9% of Microfinance Institutions (MFIs) loans and about 8% of the total banking units of Bandhan Bank, the current flood situation will affect collection trends in the short term, Motilal Oswal said. Financial Services in its inventory update. .
The performance of the MFI sector has held up well in recent months, with asset strains easing and a solid growth trajectory in 4Q22. This is also reflected in the performance of Bandhan Bank. Given the ongoing developments in Assam, we expect the rate of stress dissolution to moderate, while CE recovery and continued improvement could also be affected, the brokerage said.