Bank Nifty at record high in open, crosses 38000 mark

Bank Nifty hit a new all-time high of 38045 points, up 0.85% from the previous close. Shares of Central Bank of India rose 4%, Indian Bank 3%, Bank of India 3% and Indian Overseas Bank 2.5%. Canara Bank, UCO Bank, State Bank of India and Punjab National Bank were up 1-2%. IndusInd Bank, Kotak Mahindra Bank, ICICI Bank and Axis Bank were up 0.8-1.2%.

“We see this as a positive development as the focus is on faster resolution of stressed assets. This will improve the balance sheets of banks, and advance cash payments will also help provide incremental cash flows. will enable them to focus more on their core operations. PSUs and private banks like ICICI, Axis and Yes Bank are likely to be major beneficiaries,” Motilal Oswal said in a note to its investors.

The government stated that the National Asset Reconstruction Company Limited has already been incorporated and will acquire the stressed assets of approx. ₹2 trillion from various commercial banks in different phases. In the first phase, banks will transfer almost ₹90,000 crores of NPAs fully provided and the remaining 1.1trn in the second tranche.

Another entity – India Debt Resolution Company Ltd – which has also been set up, will try to sell stressed assets in the market.

According to media articles, some of the accounts identified by the banks include Videocon’s VOVL, Reliance Naval & Engineering, Amtek Auto, Jaypee Infratech, Castex Technologies, GTL, Visa Steel, Wind World India, Lavasa Corporation and Consolidated Construction Consortium. .

Brokerage firm Jefferies India said consolidation of debt on an entity is expected to expedite the process of finding interested buyers, transfer of assets, formalizing write-downs and re-imposition of new loan terms. Still, asset quality matters most.

“We saw this in NCLT cases (40 cases) where good people in steel sector were resolved with negligible haircuts for banks, but tough people in power, auto, consumer are yet to get a solution. Historically , banks see c.10% recovery from the written off loans, and we believe that the recovery here could be roughly in line. However there is a chance that the accounting policies allow advance recognition of profit We expect RBI/Banks to take a conservative stance,” Jefferies India said.

According to Emkay Research, among the public sector banks, State Bank of India, Bank of India, Union Bank of India and Punjab National Bank will benefit the most in terms of reduction in GNPAs due to transfer of NPAs to NARCL.

From a long-term perspective, in general, PSBs will benefit as the removal of legacy stress will free up management’s bandwidth to focus more on growth, improve capital raising prospects with a relatively clean balance sheet, and Some will have the facility of privatization. Banks envisaged by the Govt.

“However, balance sheet clean-up and privatization will have to be augmented with radical institutional and governance reforms in PSBs to ensure that they thrive amidst increasing competitive intensity. PSBs, SBI, BoB and Indian Bank are our preferred choices,” MK report added.