After-shock for bank stocks

Shares of public sector banks fell sharply on Friday as investors reacted to the government's directive to banks for rolling back the increase in their prime lending rates (PLRs).

Stocks of Punjab National Bank, Allahabad Bank, Union Bank of India, IDBI, Oriental Bank of Commerce, Syndicate Bank, Indian Overseas Bank, State Bank of Mysore, and State Bank of Travancore each fell by more than 3 per cent on the BSE.

Shares of SBI, Uco Bank, Bank of India, Dena Bank, Vijaya Bank, and Corporation Bank declined by 2-3 per cent. ICICI Bank also saw its share fall by 1.55 per cent (Rs 8.50) to Rs 547.29.

The BSE Bankex, was the largest loser. It declined by 72.47 points, compared to a 56.65-point fall in the Sensex. The Bankex closed 1.5 per cent lower at 4,773.04 points, while the Sensex closed 0.52 per cent lower at 10,866.51 points.

"The finance ministry's directive would have a negative impact on the government-owned banks' net interest margins, and, ultimately, their profits," said Huzaifa Suratwala, a banking sector analyst at securities firm Emkay. We will have to keep a watch on the credit-deposit ratio," said Huzaifa Suratwala, a banking sector analyst at securities firm Emkay.

SBI's shares declined by Rs 22.20 to Rs 807.90 per share, while Punjab National Bank fell by Rs 16.10 to Rs 368.60.

Syndicate Bank declined by 5 per cent to Rs 64.15 against the previous day's close of Rs 67.55. State Bank of Mysore fell 4.6 per cent to Rs 4,065 (Rs 4,261.10), Allahabad Bank, 4.3 per cent to Rs 64.40 (Rs 67.30), State Bank of Travancore, 3.9 per cent to Rs 2,884.40 (Rs 3,000) and Indian Overseas Bank fell 3.7 per cent to Rs 87.20 (Rs 90.55).

Shares of private sector banks like Kotak Mahindra Bank, HDFC Bank, South Indian Bank, and Yes Bank bucked the trend, with gains ranging from 1 per cent to 4 per cent.

HDFC Bank went up marginally by 0.40 per cent to Rs 797, against the previous day's close of Rs 794, while South Indian Bank was up by 3.9 per cent to Rs 63.55 (Rs 61.15), Kotak Mahindra Bank up by 1.66 per cent to Rs 287.39 (Rs 282.70), and YES Bank was up by 1.3 per cent to Rs 80 (Rs 79).