BSE Bankex dips nearly 700 points; SBI, ICICI Bank, BOI, PNB hit fresh 52-week low

Total 13 public and private sector banks hit their respective 52-week lows on the Bombay Stock Exchange (BSE) after banking share index, S&P BSE Bankex fell nearly 700 points.

At 09:59 AM, the S&P BSE Bankex, a gauge of public and private sector banks, dipped 669 points or 3.5% at 18,271 against 2.2% fall in the S&P BSE Sensex.

In past one-week, the banking index dipped 6.5% compared to 3.7% decline in the benchmark index.

State Bank of India (SBI), ICICI Bank, Bank of India (BOI), Punjab National Bank (PNB), Federal Bank, Indian Overseas Bank (IOB), Punjab & Sind Bank, Allahabad Bank, Canara Bank, Dena Bank, Oriental Bank of Commerce, Vijaya Bank and Syndicate Bank from the public and private sector banks are currently trading at their 52-week lows on the BSE.

Earlier this week, the Reserve Bank of India (RBI) had issued draft guidelines on the computation of the base rate of banks, based on marginal costs of funds, to be effective from April 1, 2016.

According to CRISIL Rating, the draft guidelines on computation of base rate, if implemented in its current form, will significantly impact profitability of banks.

CRISIL’s estimates show the change in methodology can lower banking system base rates by approximately 50 basis points (bps) from current levels. Crucially, it will reduce banking sector profitability because return on assets (RoA) will fall by 20 bps in fiscal 2017.

“Our base-case is that profitability of banks will have one-time impact of around Rs 20,000 crore in fiscal 2017, which would be equal to 15% of the total estimated profit of the banking system for that year. The actual impact will depend on whether the banks will be given a leeway to make this shift over a longer timeframe in the final guidelines,” said Pawan Agrawal, Chief Analytical Officer, CRISIL Ratings in a press release dated September 3, 2015.

Among the individual stocks, Bank of Baroda, Punjab National Bank and Kotak Mahindra Bank are down 5% each on the BSE. Yes Bank, Federal Bank, IndusInd Bank, ICICI Bank, Axis Bank, SBI and HDFC Bank are down 2%-4%.