Bank scrips advanced further on Monday, in line with the trend observed in recent weeks.

A host of bank stocks rose in morning trade. The top gainers in terms of both share price and volume was Union Bank of India (up 7% to Rs 25.10). The scrip clocked a staggering volume of 39.5 lakh shares on the BSE in the first two hours of the session.

Among other bank stocks, Corporation Bank was up 5% at Rs 139 on the BSE, boosted by strong Q3 results that it unveiled in the morning. Andhra Bank was up 3.7% at Rs 26.20, Oriental Bank of Commerce was up 3.1% at Rs 61.45, Dena Bank was up 2.49% at Rs 16.45, Indian Overseas Bank was up 2.3% at Rs 17.75, Karnataka Bank was up 2% at Rs 71.80, Global Trust Bank was up 1.9% at Rs 18 and Canara Bank was up 1.7% at Rs 56.60.

Shares of the country's largest private sector bank, State Bank of India, was up 0.2% at Rs 294.25 on the BSE. The SBI scrip currently trades close to its 52-week high.

Both operators as well as institutions were active buyers of stocks of public sector banks, that has boosted their prices amid high volumes in the last few sessions.

The rally in bank stocks was triggered by the passing of the Securitisation Bill in Parliament on 22 November 2002, that paves the way for recovery of sticky loans of banks.

The current surge in bank scrips also comes on buoyant Q3 results that some banks have posted so far on the back of gains in treasury portfolios. UBI announced a 45% growth in its DQ 2002 net profit to Rs 143.58 crore, compared to Rs 99.01 crore in DQ 2001. UBI's total income grew by 9% to Rs 1,281.33 crore, from Rs 1,174.86 crore in DQ 2001. The jump in net profit was due to a surge in treasury gains.

Mangalore-based Corporation Bank posted a net profit of Rs 151.81 crore (Rs 1.51 billion) for the quarter ended 31 December 2002 as compared to Rs 91.45 crore in the quarter ended 31 December 2001, recording a 66% growth. Total income for the quarter increased from Rs 602.08 crore (Rs 6.02 billion) in DQ-2001 to Rs 693.14 crore (Rs 6.93 billion) for DQ-2002, recording a 15% growth.

However, it was a surge in interest income rather than treasury operations that boosted private sector UTI Bank's net profit in Q3. Its net profit surged by 44% to Rs 51.50 crore on an 80% jump in net interest income to Rs 91.50 crore, that was backed by a healthy rise in advances.

Another private sector bank, IDBI Bank, announced a massive 206.8% rise in net profit to Rs 27.43 crore in Q3, compared to Rs 8.94 crore in the corresponding period last year. Net interest income also increased by 58% to Rs 53.15 crore (Rs 33.7 crore).

But public sector Syndicate Bank's results were flat. The bank reported a net profit of Rs 100.40 crore in Q3 ended December 2002, compared to Rs 99.99 crore in Q3 ended December 2001. Total income rose by 8.3% to Rs 819.25 crore (Rs 8.19 billion).

Analysts said that bank stocks are currently undergoing an upward re-rating as a result of the Securitisation Bill. Hitherto, archaic laws tilted in favour of borrowers made it difficult for banks and financial institutions to recover debts.

According to the ministry of finance, non-performing assets of public sector banks in India range between Rs 70,000 crore (Rs 7000 billion) to Rs 100,000 crore (Rs 10,000 billion). NPAs of banks and FIs account for over 5% of the gross domestic product.

On 22 November 2002, Parliament cleared the Securitisation Bill. Lenders can now send notices to defaulters, giving them a period of 60 days to make the payment of dues. If the borrowers fail to pay during this period, the Bill allows the lenders to take possession of defaulters' properties and also the personal properties of promoters/directors pledged with the bank. The Bill is a significant legislative initiative to address the malaise of mounting NPAs. Further, it paves the way for setting up of asset reconstruction companies to recover NPAs. Importantly, the Bill has created a right environment for the lending business, according to analysts.

Meanwhile, shares of public sector Andhra Bank have also been boosted by the bank's proposal to reduce its equity. Andhra Bank, last week, said it will hold an extra-ordinary general meeting of shareholders on 10 March 2003, to seek approval for the bank's proposal to return capital to the extent of Rs 50 crore to the Centre. The bank proposes to return the capital in the current financial year (2002-03) itself, subject to approval from the Ministry of Finance.