State Bank of India , the nation’s biggest by assets, fell in Mumbai on concern a government order to forgive debt to poor farmers will spur a rise in bad loans.
State Bank declined 2.35 percent, or 42.9 rupees, to 1,779.5 rupees at 10:19 a.m. local time. Morgan Stanley and Macquarie Research cut their rating after State Bank Chairman O.P. Bhatt told analysts on a conference call May 2 that more farmers had stopped repaying loans since the debt waiver was announced.
State Bank has fallen 21 percent since Finance Minister Palaniappan Chidambaram told banks to forgive 600 billion rupees ($15 billion) of debt in his budget speech Feb. 29. The Mumbai- based lender, 59.7 percent owned by the government, has the most loans to the agricultural sector among Indian banks.
``We are surprised at how quickly the NPLs have accrued on the agri portfolio,’’ Credit Suisse analysts Aditya Singhania and Srinivasan R. said in a note to clients. ``The increase in NPLs across most businesses including retail, small and medium enterprises and mid-corporates is also worrying.’’
The government plans to waive all loans overdue as of December for farmers who own less than two hectares of land and will arrange a one-time settlement for large farm loans. Chidambaram has pledged to compensate the banks, without specifying if the full amount will be paid.
Rating Reduced
The bank’s share price target was cut to 1,550 rupees from 1,910 rupees and its rating reduced to ``underweight’’ from ``equal-weight,’’ Mumbai-based analysts Anil Agarwal and Ashish Jain of Morgan Stanley said in a note to clients today.
The bank’s non performing assets rose to 128 billion rupees at the end of March compared with about 100 billion rupees a year earlier, the lender said on May 2.
``State Bank reported a 21 percent sequential increase in non-performing loans,’’ Agarwal and Jain said in the note. ``We expect non-performing loans to increase as we move forward.’’
Macquarie Research cut State Bank’s stock rating to ``underperform’’ from ``neutral,’’ analysts Seshadri Sen and Mudit Painuly said in a note.
``Asset quality at the bank remains under pressure,’’ the Macquarie analysts said.
Source:Bloomberg
No comments:
Post a Comment