Bank stocks edge lower on asset quality worries

 Mumbai: Bank stocks came under selling pressure today, falling by up to 2 per cent, after Standard & Poor's said their asset quality and capitalisation are likely to remain under pressure in the next 12 months.

Shares of Bank of Baroda fell by 2 percent, Punjab National Bank lost 1.92 percent, ICICI Bank (1.19 percent), HDFC Bank (1.17 percent), State Bank of India (1.11 percent) and Axis Bank (1 percent) on BSE.

The BSE bank index was trading lower by 0.39 percent to 18,081.98 at 1220 hrs.

Indian banks' asset quality and capitalisation are likely to remain under pressure in the next 12 months mainly because of tepid industrial activity and high leverage by some corporates, Standard & Poor's said yesterday.

"We expect profitability of Indian banks to decline over the next two to three quarters because banks recently cut base lending rates, and their credit costs are likely to remain high," S&P credit analyst Amit Pandey said.

He said the non-performing loans of banks with high exposure to troubled sectors will continue to rise, and credit costs of banks with a backlog of provisions will increase.

"The asset quality and capitalisation of India's banking sector is likely to remain under pressure in the next 12 months because of tepid domestic industrial activity, and subdued profitability and high leverage in some corporate sectors," S&P said in its report.