52 week FLOP: BSE BANKEX :: Business Line

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BSE Bankex, which represents the banking sector was the top performing sector index (banking sector) up to November 2010 peak. Since then, it has lost a quarter of its value. During the same period, the BSE Sensex lost 16 per cent of its value. Concerns of rising interest rates and slow down impacting the asset quality of their loans, tight liquidity and cost of savings deposit pressuring spreads, and credit growth moderation led to a de-rating of the sector.

The BSE Bankex's price-to-book valuation fell from 3-2 times book in a year. This is despite PSU banks expanding their books due to capital infusion from the Government.

Private sector players such as HDFC Bank, Kotak Mahindra were the only banks which have managed to give positive returns during the past year. State Bank of India, Union Bank of India and IDBI Bank were the worst performers. SBI lost close to 40 per cent due to higher asset quality slippages, taking a one-time employee provision hit instead of spreading it out as other banks have done and rating agency downgrade.

PSU banks additionally had high exposure to government investments which led to investment depreciation and fall in sale of investments. Unlike private banks, they also didn't have access to a large proportion of fee income to protect against earnings volatility.

Employee provisions, high proportion of restructured assets and system-generated NPA recognition have also led to more losses from PSU bank stocks.