Nifty PSU Bank index recovers 3% from intra-day low

Illustration by Ajay Mohanty
Shares of public sector banks were in focus with the Nifty PSU Bank index recovering more than 3% from its early morning low on the National Stock Exchange (NSE).

At 12:00 PM; Nifty PSU Bank was trading 0.41% higher at 3,507, bouncing back 3.1% from 3,401 levels recorded in intra-day trade today. The index hit high of 3,510 so far.

On comparison, Nifty Private Bank and Nifty Bank index were down 1% each, while the benchmark Nifty 50 index trading 0.81% lower at 10,673.

IDBI Bank, Jammu & Kashmir Bank and Canara Bank have recover more than 6% from their respective intra-day lows, while Dena Bank, Bank of Baroda, Oriental Bank of Commerce, Indian Bank, Union Bank of India and Syndicate Bank up 4% from their early morning lows on NSE.

Thus far in the calendar year 2018, Nifty PSU Bank index had underperformed the market by falling 5.6% as compared to 3.6% rise in Nifty Bank and 2.2% gain in the Nifty 50 index till Friday.

Total 11 PSU banks include Oriental Bank of Commerce, Indian Overseas Bank, Allahabad Bank, Dena Bank, Corporation Bank and Union Bank of India hit their respective 52-week lows on BSE in intra-day trade.

Last week, the rating agency CRISIL has revised its outlook on the long-term debt instruments (excluding Basel III Tier I) of 18 public sector banks (PSB) to ‘Stable from ‘Negative’, while reaffirming their ratings.

“The revision in outlook is primarily driven by government’s PSB recapitalisation programme for this fiscal, which will improve the financial risk profile of these banks and also help them meet Basel III regulatory capital norms, and provide cushion against expected rise in provisioning for non-performing assets (NPAs),” CRISIL said in a press release.

The ratings on Basel III Tier I bonds of nine PSBs have also been reaffirmed, and the outlook has been retained as ‘Negative’.

CRISIL has assessed the impact of bank recapitalisation plan and believes with expected capital infusion from government, PSBs are now adequately placed to meet Basel III capital norms and are also better prepared to absorb the hit from provisioning on stressed assets and also on account of migration to Ind AS (Indian Accounting Standards).

“The recapitalisation plan while emphasising government’s support, also persuades public sector banks to up the ante on responsible banking. The upshot of more accountability, governance and efficiencies is a structurally stronger banking system and improved investor sentiment towards them,” said Krishnan Sitaraman, Senior Director, CRISIL Ratings.

Asset quality issues are peaking for banks with incremental slippages to NPAs expected to taper in fiscal 2018 and 2019 as credit health of corporate borrowers’ are improving. However, the resolution of large corporate stressed accounts under the Insolvency and Bankruptcy Code and the potential haircuts thereof are expected to increase the provisioning burden of PSBs and impact their earnings profile and capital position in the near term, the rating agency said.

Moody's Investors Service also said that the India government's detailing of how much capital each public sector bank will receive in the financial year ending March 2018 is credit positive  for the sector.

"This announcement is a credit positive for all public sector banks, and  especially the weaker ones, as the government has made it very explicit  that it will ensure that all such banks meet minimum regulatory capital  requirements," says Srikanth Vadlamani, a Moody's Vice President and  Senior Credit Officer.

IDBI BANK 55.75 60.30 60.20 8.0
CANARA BANK 298.30 317.00 316.60 6.1
J & K BANK 66.00 71.00 70.00 6.1
ORIENTAL BANK 108.15 114.15 113.90 5.3
DENA BANK 22.10 23.40 23.25 5.2
INDIAN BANK 327.25 343.50 343.50 5.0
UNION BANK (I) 120.65 126.25 125.95 4.4
BANK OF BARODA 149.10 156.15 155.60 4.4
BANK OF INDIA 142.50 149.40 148.55 4.3
SYNDICATE BANK 64.00 66.95 66.70 4.2
VIJAYA BANK 57.70 60.20 60.10 4.2
UNITED BANK (I) 14.65 15.30 15.25 4.1
PUNJAB NATL.BANK 156.90 163.45 162.80 3.8
I O B 20.50 21.80 21.20 3.4
CENTRAL BANK 67.00 71.95 68.85 2.8
ST BK OF INDIA 289.80 298.75 297.65 2.7
ALLAHABAD BANK 59.45 61.50 61.00 2.6
ANDHRA BANK 47.50 48.80 48.65 2.4
CORPORATION BANK 35.10 36.00 35.90 2.3
PUN. & SIND BANK 41.05 42.05 41.90 2.0
Share price on BSE

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