Banking shares are in focus on the bourses in early noon deals with most the frontline stocks trading higher by more than 2% each on the National Stock Exchange (NSE). The banking share index, Bank Nifty has surged 2.5%, compared to 1.9% rise in the benchmark index S&P CNX Nifty at 1132 hours.

Canara Bank, Union Bank of India, Bank of India and Axis Bank has rallied more than 4% each, while State Bank of India, Punjab National Bank and ICICI Bank are up between 3-4% each.

According to media reports, with a stiff competition and a vigilant regulator, banks are inventing new ways for fees and charges to protect their margins.

Large private banks are expected to report healthy 19.3% year-on-year (y-o-y) growth on the net profit for the quarter ended December 2011, while the state owned banks are likely to post weak 2.6% y-o-y growth due to higher provisioning expenses, said Angel Broking in its Q3 result preview.

With interest rates only poised to start declining from FY2013 (Apr-Mar), the research firm expects margins of banks to remain at relatively similar levels for 2HFY2012 (Apr-Sep), as witnessed in 2QFY2012 (Jul-Sep).