PSBs extend gain; Nifty PSU Bank index surges 10% in four days

Shares of public sector banks (PSBs) were trading higher for the fourth straight day, after the Supreme Court's decision on Essar Steel resolution came in favor of the financial creditors.

At 10:43 am, Nifty PSU Bank index was up 1 per cent, surging 10 per cent in the past four trading days. In comparison, the benchmark Nifty 50 index has gained 1.3 per cent during the same period.

Among individual stocks, Corporation Bank has rallied 82 per cent in four days from Rs 15.70 to Rs 28.50 today. UCO Bank soared 42 per cent, while Oriental Bank of Commerce surged 24 per cent in four days. Andhra Bank, Punjab & Sind Bank, Syndicate Bank, Central Bank of India and Bank of Maharashtra were up in the range of 15 per cent to 20 per cent.

The Supreme Court of India on Friday pronounced that the resolution of Essar Steel would proceed as per the proposed resolution plan of October 18. Essar steel was one of 12 systemically large non-performing assets (NPAs) that Reserve Bank of India (RBI) had directed banks to refer to the National Company Law Tribunal (NCLT). The financial creditors had an exposure of Rs 49,500 crore, while operational creditors had an exposure of Rs 19,700 crore, as per July 2019 NCLT documents.

Analysts expect the Supreme Court judgement to be a huge positive on pace of receivable for lenders, which could see liquidity return fast with credit growth spurt in the near future.

“We see this event as a significant sentiment positive towards the resolution process in India and expect more to start happening based on this judgement in other NPAs as well,” analysts at JP Morgan said in a note.

“Healthy recoveries are expected for State Bank India, Bank of Baroda, Canara Bank and Punjab National Bank (PNB). We expect banks to have a high provision cover (in some cases 100 per cent) on this exposure, given Essar has been an NPA for the sector since Mar-16 – hence, most of the loan recovery should flow through the P&L as provision write-backs / recoveries from written-off accounts,” analysts at JM Financial Institutional Securities said in a banking sector update.

Bank 14/11/2019 Latest % chg
Corporation Bank 15.70 28.50 81.5
UCO Bank 13.19 18.69 41.7
Oriental Bank 50.95 63.30 24.2
Andhra Bank 17.15 20.55 19.8
Pun. & Sind Bank 18.20 21.70 19.2
Syndicate Bank 25.75 30.60 18.8
Central Bank 19.30 22.85 18.4
Bank of Maha 11.20 13.25 18.3
Union Bank (I) 52.30 59.95 14.6
Bank of India 66.25 75.85 14.5
Canara Bank 200.15 226.40 13.1
I O B 9.82 11.10 13.0
United Bank (I) 8.60 9.55 11.0
Indian Bank 114.40 125.95 10.1
St Bk of India 306.10 330.25 7.9
Bank of Baroda 93.30 100.50 7.7
Punjab Natl.Bank 60.30 64.70 7.3
Allahabad Bank 25.55 26.00 1.8


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