- Banking stocks fell 4.3% in Samvat 2082, with Federal Bank up 47% and Yes Bank down 32%
- Credit growth rose while deposit growth slowed, raising concerns over deposit mobilisation
- Public sector banks reported lowest-ever non-performing assets, improving asset quality
Banking stocks ended Samvat 2082 on a weak note, with the Nifty Bank index falling 4.3% over the year. The decline, however, was not across the board. Federal Bank gained 47%, emerging as the top performer, while Yes Bank was the biggest laggard, plunging 32%.
As Samvat 2083 begins, banks will have to contend with a fresh set of challenges, analysts said. Credit growth has picked up and asset quality remains healthy, but deposit mobilisation continues to be a concern amid slower deposit growth and rising competition for funds.
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Investors will also watch out for CASA trends, net interest margins (NIMs) and the impact of regulatory changes on lenders' profitability.
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Samvat 2082: Federal Bank Gains 47%, Yes Bank Falls 32%
Federal Bank was the top-performing stock among the banks tracked, gaining 47% during Samvat 2082. Union Bank of India followed with a 29.6% rise, while IndusInd Bank surged 12.7%.
State Bank of India (SBI) rose 7%, while Kotak Mahindra Bank gained 5%.
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On the flipside, Yes Bank was the top laggard, falling 32%. HDFC Bank declined 27.6%, while Bank of Baroda lost 10.3%. Canara Bank and IDFC First Bank tumbled 8% and 4.8%, respectively.
What Shaped Banking Stocks In Samvat 2082?
One of the key developments during the year, analysts said, was an acceleration in credit growth, even as deposit growth slowed. This kept the focus on banks' ability to mobilise deposits to support lending.
Asset quality, too, improved, with public sector banks recording their lowest-ever non-performing asset (NPA) levels.
Another crucial development was the mobilisation of $132 billion in Foreign Currency Non-Resident Bank (FCNR(B)) deposits through the Reserve Bank of India's special swap window.
Samvat 2083 Outlook: Three Things That Could Decide The Next Move For Bank Stocks
1. Deposit competition and CASA trends
Slower deposit growth has made deposit mobilisation a key priority for lenders, analysts said. Competition for deposits and movements in CASA ratios will be important indicators to watch, as banks look to maintain funding levels and manage their cost of funds.
2. Net interest margin pressure
Margin trends will remain a key monitorable. Several banks faced pressure on margins due to FCNR(B) deposits. Investors will track whether lenders can protect profitability as funding costs and lending rates adjust.
3. Impact of new insurance norms and ECL framework
The impact of the Insurance Regulatory and Development Authority of India's (IRDAI) new insurance norms and the expected changes under the expected credit loss (ECL) framework will also be on investors' radar. These regulatory developments could have implications for banks' businesses and financial performance.
Samvat 2083: Five Bank Stocks With The Highest Return Potential
Despite the problems, select banking stocks are seen offering upside potential. HDFC Bank leads the list with an estimated return potential of 31.6%. Axis Bank (28.8%), and Canara Bank (27.8%).
State Bank of India and IDFC First Bank may rally up to 27.3% and 24.6%, respectively.
Now, investors will be watching deposit trends, profitability and regulatory changes to identify the next set of outperformers.
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