Financials in focus; Shriram Transport Finance, IndusInd, ICICI Bank up 7%

Shares of financials were in focus on the National Stock Exchange (NSE) in an otherwise subdued market on Monday after ICICI Bank and IndusInd Bank reported good set of July-September quarter (Q2FY21) numbers.

Both these stocks surged 7 per cent in the intra-day deals, while Bank of Baroda, Punjab National Bank, Bandhan Bank, Axis Bank, RBL Bank and State Bank of India (SBI) from the Nifty Bank index were up in the range of 3 per cent to 6 per cent. Besides, Shriram Transport Finance Company and Cholamandalam Investment and Finance Company from the non-banking financial companies (NBFCs) universe were up 8 per cent and 7 per cent, respectively.

At 01:43 pm, Nifty Bank, Nifty PSU Bank and Nifty Private Bank indices were up 3 per cent each while Nifty Financial Services index was up 2.4 per cent, as against 0.24 per cent decline in the benchmark Nifty50 index.

Shares of ICICI Bank hit an intra-day high of Rs 421 after the lender reported a six-fold jump in the standalone net profit at Rs 4,251 crore for the quarter ended September 2020 (Q2FY21) on account of growth in net interest income (NII), lower credit cost, and nil Covid-related provisions. It had posted a net profit of Rs 654.9 crore in the July-September 2019 (Q2FY20).

The bank's net interest income (interest income minus interest expended) grew 16 per cent to Rs 9,366 crore in Q2FY21 from Rs 8,057 crore. That apart, its asset quality improved with gross non-performing assets (NPAs) declining to 5.17 per cent in September 2020 from 6.37 per cent in September 2019. The net NPAs declined to 1.0 per cent from 1.6 per cent.

IndusInd Bank, too, gained 7 per cent to Rs 627 on the back of encouraging asset quality performance. Its GNPA and NNPA ratio declined by 32 bps and 34 bps, respectively to 2.21 per cent and 0.52 per cent. The management expects restructuring to be in low single digits and stated intention of continuous build-up of provision to cushion balance-sheet and move towards normalize FY22.

"FY21 earnings would see sharp revision on a lower base and upgrade FY22 earnings by 5 per cent and expect ROAs of 0.9 per cent/1.3 per cent for FY21/22e. These ratios are likely to be new normal for IndusInd Bank as compared to superior 1.9-2 per cent, as corporate fees and low credit cost under the changed business model could stay impacted," analysts at Antique Stock Broking said in result review note.

It's a long road to normalcy for commercial vehicles financiers and Shriram Transport being the largest CV financier, can see relatively more impact due to the current situation. Fortunes of Shriram are closely linked to the revival of economy and its long track record and improved underwriting can help it sail through tough times, the brokerage firm said in a report. The stock of Shriram Transport Finance Company rallied 10 per cent to Rs 762 on the BSE on Monday after brokerages maintained 'buy' rating on the stock post Q2FY21 results. The stock recorded its sharpest intra-day gain in the past six months. Earlier, on April 30, 2020, it had rallied 15 per cent in intra-day trade on the BSE.