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Bank stocks gain on consolidation hopes

Aparna Krishnan

MUMBAI, June 13

SECOND-rung stocks of most sectors have been lately attracting buying interest in the stock markets. This time, it is the turn of banking stocks. Analysts say that the reasons for this interest are two fold: one, the consolidation in the sector and two, good financial performances of key public sector banks.

Among the stocks that gained considerably today are State Bank of Bikaner (up 5 per cent to close at Rs 456.90 on the BSE), State Bank of Mysore (up 6.9 per cent at Rs 310), State Bank of Travancore (up 5 per cent at Rs 347.55), Karnataka Bank, Dena Bank (up 3.6 per cent Rs 12.80), Centurion Bank (up 0.5 per cent at Rs 10.35) and Dhanlakshmi Bank (up 1.3 per cent to close at Rs 19.50).

Private banks such as Global Trust Bank, Nedungadi Bank, UTI Bank and Vysya Bank also witnessed activity.

Says an equity analyst, "the banking sector is going through intense consolidation. Smaller banks including some private banks seem to be a target for acquisition by the bigger players who are looking for increased penetration in this fast growing sector."

Financial institutions such as HDFC and IDBI and foreign banks too were looking at acquiring several smaller banks for establishing themselves in the Indian banking sector, said the analyst.

Another reason for the interest is the apparent turnaround of the so-called `weak banks' such as Indian Bank and Dena Bank, which have registered good financial performance in the past few quarters.

"The results of the 20-odd nationalised banks for financial year 2001-02 showed a rise in net profit, thus dispelling concern over the quantum of their non performing assets," said an industry expert.

According to a research analyst from a domestic brokerage firm, the northward trend in banking stocks is set to continue in the ensuing months.

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