)
Shares Development Credit Bank (DCB), Karnataka Bank, Lakshmi Vilas Bank and Karur Vysya Bank rose earlier in Thursday’s trades but could not cling to gains as traders booked profits after the broader market weakened mid-way.
DCB shares, which rose to a high of Rs 56.15, ended 2.5 per cent lower at Rs 51.75. Karnataka Bank rose 1.2 per cent to close at Rs 102.75 but off the day’s high of Rs 108.85. Karur Vysya Bank ended at Rs 368.10, almost flat from the previous day.
Market
After rising 248 points in early trade, the Sensex on Thursday gave up all gains to close 72 points down at a fresh one-week low. NSE index Nifty fell 27.90 points to end at 6,187.25.
Fund managers and analysts said the gains in these shares on Thursday were not sustainable.
“Mergers and Acquisitions (M&A) in the sector is quite tedious because of trade unions in these banks especially the regional ones. So, it was more of a trading play,” said the chief investment officer of a bank-owned mutual fund.
Also, regional private banks are not in the best of health, said analysts.
“Regional banks have been delivering RoEs close to the industry average but this does not adequately reflect the problems individual banks face. While a few banks delivered consistent performances, they are not the norm,” said Kotak Institutional Equities’ analysts led by M.B. Mahesh.
“Regional banks’ problems are complicated with their shareholding structure resulting in low tier-1 ratios, high NPLs, inefficient cost-structures and weak revenue metrics or poor transition,” they said.
