At 12:15 pm; Nifty PSU Bank index, the largest gainer among sectoral indices, was up 4% at 2,890, as compared to 0.17% decline in Nifty 50 index at 10,234 points. In past two trading days, PSU bank index gained 12% against 2% rise in the benchmark index.
Among the individual stocks, Union Bank of India has surged 13% to Rs 79.10 in intra-day trade today, extending its previous day’s 12% rally after the bank reported a net profit of Rs 1.39 billion in September quarter (Q2FY19). The higher net profit during the quarter primarily led by lower provisions and muted operating expenses. It had posted a net loss of Rs 15.31 billion in the same quarter last fiscal.
Analysts at Narnolia Financial Advisors expect, the Union Bank of India’s worst performance in terms of profitability is behind and will see gradual improvement in earnings going ahead but will remain volatile. The brokerage firm believes NPA cycle has peaked out and will reverse as recovery & up-gradation is expected to be more than the slippages going ahead.
OBC soared 10% to Rs 82.10 in intra-day trade, after gaining 13% on Monday. The stock rallied 35% in past one week, after reported a profit of Rs 1.01 billion in Q2FY19, against losses for seven consecutive quarters, despite an increase in bad loans. It had reported a net loss of Rs 17.49 billion in the corresponding July-September quarter of 2017-18. Total provisioning eased to Rs 10.74 billion for the quarter, down from Rs 31.47 billion a year ago.
SBI was trading 4% higher at Rs 278, extending its previous day’s 8% surge on the BSE. The brokerage firm JP Morgan has ‘overweight’ rating on SBI with a price target of Rs 360.
“We expect core ROE to reflate in FY20 as the bank crosses the “hump” on provisions and NPA recognition over FY19. With the large part of credit costs and operating costs over in FY19, SBI should start reverting to normalized profitability in FY20,” analysts at JP Morgan said in a note.
The CD ratio at 72%, excess SLR, and upside surprise from resolutions in power and steel are additional margin and growth drivers. SBI, in our view, remains one of the top beneficiaries of bond market disintermediation as high-grade corporate and NBFC credit will likely move back to the bank, further improving its loan growth profile, it added.