Indian bank shares tumble as cash revamp threatens profit

Bloomberg

Shares of India’s big state-owned banks fell on the risk that the government’s recall of high-value currency notes will dent their profits.
State Bank of India, the nation’s biggest by assets, declined by as much as 4.8 percent on Monday, its biggest intraday fall since Nov. 9 and the worst performance on the benchmark S&P BSE Sensex. Bank of Baroda lost as much as 9.9 percent.
The declines may signal that investors are reassessing the effect on banks of Prime Minister Narendra Modi’s unexpected Nov. 8 move to withdraw 500 rupee ($7.3) and 1,000 rupee notes in a crackdown on tax evasion and the underground economy. Shares of lenders such as State Bank of India had jumped in the days after the decision.
“Banks are just exchanging money and not doing any lending for the past 10 days which will hurt their third-quarter performance,” Rakesh Kumar, an analyst at Elara Securities India, said by phone. “Margins for the next two quarters will take a hit.”
State Bank climbed 11 percent in two days after the demonetization
announcement.