Bank stocks gain currency

Banking stocks were in the limelight today. Most of the stocks in the sector recorded double digit growth. Scrips of State Bank of India's (SBI) associate banks gained the most.

The rise in these stocks was after SBI chairman A K Purwar's statement that there are certain steps in the offing to increase the liquidity in the stocks.

According to Purwar, proposals have been made to the government regarding the issue. He is hopeful that it could go through by the end of the year or by early next year, Purwar said at Thiruvananthapuram on the occasion of diamond jubilee of State Bank of Travancore yesterday. Purwar also mentioned that the bank is considering a share split.

He also pointed out that the `virtual merger' of SBI with its associate banks was on. This means that banks in the State Bank group will have a common technology platform and business processes, he noted. However a legal merger of the banks will have to wait for some time.

With the commissioning of the core banking solution, all 671 branches of SBT are now networked for offering the bank's customers anytime, anywhere banking. By December, all associate banks of SBI will be brought under the core banking network, Purwar said.

All banks in the State Bank Group, including SBI's branches, will be on the network by the end of 2006. R Shrishankar, head of research with IL&FS Investsmart, said that this move is perhaps a step ahead for integration.

The other top gainers today were State Bank of Bikaner & Jaipur (up 44.39 per cent at Rs 3450.65) and State Bank of Mysore (up 20 per cent at Rs 3715.95.

Out of the 15 stocks that make up the BSE Bankex, 14 ended up in positive territory. The Bankex ended the day at 4832.40, up 66.05 points or 1.39 per cent from its previous close.

However, the gains in leading banking stocks like ICICI Bank, SBI and HDFC Bank were muted. While the ICICI Bank stock recorded a 1.19 per cent rise to close at Rs 518.65, SBI was up 1.60 per cent at Rs 881.65. HDFC Bank moved up 2.37 per cent to end the session at Rs 688.05.

The outlook on the banking stocks remains bullish. Analysts note that considering the growth in retail and corporate lending, the sector is expected to record good growth going forward.

Corporates have also lined up huge capital expenditure plans during the year, which augurs well for the growth in corporate lending. However, it is the retail lending that is expected to witness a phenomenal growth, say analysts.

Another factor that has proved helpful for the bank sector is that the retail loan segment has been very good in the past couple of years and growth in segments like home loans, auto loans expected to witness manifold growth in the years to come.

Another factor which has helped the performance of banks, especially in the public sector is that most PSU banks have cleaned up their balance sheets over the past few years by using their considerable treasury profits to write-off non-performing assets.