Nifty PSU Bank index up 3%; SBI hits fresh 6-month high ahead of Q1 results

Union Finance Minister Arun Jaitley is expected to address the two-day conclave at the State Bank of India (SBI) Academy in Gurugram
Shares of public sector undertaking (PSU) bank were in focus with the Nifty PSU Bank index gaining more than 3% on the National Stock Exchange (NSE) in an otherwise range-bound market on Thursday.

Union Bank of India, Allahabad Bank and Oriental Bank of Commerce were up 5% each, while Andhra Bank, Bank of India, Canara Bank, Bank of Baroda, Syndicate Bank, Punjab National Bank (PNB) and State Bank of India (SBI) were up in the range of 3% to 4% on the NSE.

At 11:31 AM; Nifty PSU Bank index, the largest gainer among sectoral indices, was up 3.5% at 3,397.20, as compared to 0.19% rise in the Nifty 50 index. The PSU bank index hit a high of 3,399.80, its highest level since February 14, 2018.

SBI rallied 3.5% to Rs 320, its fresh six-month high on the NSE, ahead of its April-June quarter (Q1FY19) results on Friday, August 10, 2018. The stock of largest public sector lender was trading at its highest level since January 25, on the NSE.

Since May 22, post January-March (Q4FY18) results, SBI have outperformed the market by surging 31% as compared to 10% rise in the Nifty 50 index.

“Within PSU banks, SBI remains the best play on a recovery in the Indian economy, given lowest net stress loans (NSL) at around 11%, relatively healthy PCR, conservation of capital, healthy capitalization (CET of around 9.3%), strong liability franchise (Retail deposits of >95%) and a focus on core operating profitability,” Motilal Oswal Securities said in Q1FY19 result preview.

Asset quality problems are largely recognized, and we derive comfort from clarity on the quantum of stress on the books. As a trend, bulk of corporate slippages has occurred from the watch-list while the performance in core portfolio has been very strong. With merger issues largely behind, improvement in operating leverage is expected to further aid earnings recovery, the brokerage firm said.

“SBI expected to report NII growth of 10% to Rs 193.26 billion as incremental slippages should be lower than Q4 and MCLR hike of 10 bps to support NIM. Also with slippages seen around Rs 60-80 billion, provisions should also be lower quarter on quarter (QOQ). Benefit of Bhushan Steel recovery can reflect in writeback of provisions of around Rs 10- 15 billion leading to overall NPA provisions at Rs 92 billion, Investment provisions are expected to stay elevated at Rs 35 billion. Thereby we expect marginal PAT at Rs 10.46 billion vs loss in Q4FY18,” ICICI Securities said in result preview.


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