Bank shares gain; IndusInd Bank, Yes Bank hit 52-week high

Banking shares were in focus and trading higher in the range of 1%-4%, with the IndusInd Bank and Yes Bank touching their respective 52-week highs on the National Stock Exchange (NSE).

IndusInd Bank, Canara Bank, Yes Bank, Kotak Mahindra Bank, Bank of Baroda and HDFC Bank were trading higher by more than 2% each, while State Bank of India (SBI), Federal Bank, Axis Bank and Punjab National Bank up 1%-2% on the NSE.

At 03:09 pm, Nifty Bank index was up 2% or 336 points at 17,015 as compared to 1.5% rise in the Nifty 50.

In past four-trading sessions, Nifty Bank index rallied 4% after a media report suggests, the Reserve Bank of India (RBI) has eased pressure on banks by pruning the list of companies whose loans need to be provided for against the risk of default. The benchmark index gained less than 1% during the period.

Religare Institutional Research said corporate lenders like ICICI Bank and SBI that have the highest exposure to these companies will benefit the most. Banks are expected report high treasury gains in Q4 since G-sec yields have declined by around 30 basis points quarter on quarter and if slippages turn out to be lower than anticipated, earnings could surprise positively as compared to our and consensus estimates.

Among the individual stocks, IndusInd Bank has touched its record high of Rs 1,025, up 4%, extending its past two day’s gain, after it reported a strong set of numbers for the fourth quarter ended March 31, 2016 (Q4FY16).

The bank had reported a strong 25% year on year (yoy) jump in net profit at Rs 620 crore in Q4YF16 on back of 37% YoY growth in net interest income (interest earned minus interest expended).

Religare Institutional Research reiterates ‘buy’ rating on the stock with a price target of Rs 1,220, given the bank’s strong earnings growth, improving liability franchise and stable asset quality.

“IndusInd Bank’s asset quality remains strong and credit cost for FY16 stood at 57 basis points (bps) vs. management guidance of 60bps. FY17 credit cost is likely to remain lower than that seen in FY16 as the retail loan book is expected to do better,” the brokerage house said in a report.

Yes Bank was hit a 52-week high of Rs 914, up 4% on the NSE ahead of its Q4 results tomorrow. HDFC Bank up 2% at Rs 1,114, trading close to its 52-week high of Rs 1,128 touched on July last year.