Distressed assets weigh on PSU bank stocks

Stock price decline calculated between 31 Dec 2012 and 15 May 2013;
*Indian Overseas Bank; ** Oriental Bank of Commerce

Owing to the slowdown in the economy, several businesses are facing tough times and struggling under the weight of debt. The loan books of PSU banks have already been under pressure on account of rising non-performing assets and loan restructuring.

As per an article in the Economic Times, the worst is not over yet. PSU banks are expected to continue to witness significant loan restructuring for yet another quarter. Two major PSU banks, Bank of Baroda and Union Bank of India are expecting to restructure loans to the tune of Rs 48 bn in the June ending quarter. United Bank of India witnessed a whopping 80% drop in net profits in the quart er ended March 2013 due to bad loans and squeeze on margins. Overall, the banking sector has been significantly affected by the slowdown in the economy.

Today's chart of the day shows PSU bank stocks that have witnessed a steep decline in their price in the year so far.