PSU banks rally; Nifty PSU Bank index up 5%

Shares of public sector undertaking (PSU) banks were in focus with Nifty PSU Bank index gaining 5%, its sharpest intra-day gain during past one month on the National Stock Exchange (NSE).

At 11:13 am; Nifty PSU Bank index, the largest sectoral index, was up 4.9% at 2,844, as compared to 0.73% rise in the Nifty 50 index. The index surged 5.1% in intra-day deal, recorded its biggest intra-day trade since March 26, 2018, when it was up 5.4%.

State Bank of India (SBI), Oriental Bank of Commerce, Union Bank of India, Andhra Bank, Bank of India, Canara Bank, Bank of Baroda (BoB) and Allahabad Bank from the index were up in the range of 5% to 7% on the NSE. IDBI Bank, Punjab National Bank, Syndicate Bank and Indian Bank were up 3% to 4%.

On Thursday, Nifty PSU Bank index closed at 2,712, its lowest level since June 30, 2016. In past twelve trading days, the index underperformed the market by falling 11.5% against 2% rise in the Nifty 50 index till yesterday.

“Delay in resolution of stressed assets, lack of growth capital and increasing competition from private banks continue to mar the performance of state owned banks. However, with large-scale capital infusion by the government under the recapitalization program and stake sale in non-core businesses, state owned banks should finally get back on the growth track,” Motilal Oswal Securities said in quarterly preview.

The Reserve Bank of India’s (RBI) revised stressed assets recognition framework and tightened supervision in the wake of frauds in the sector will yield long-term dividends, added report.

However, Motilal Oswal Securities expect profit growth to remain muted for state owned banks in March quarter on a sequential basis, with elevated provisions toward the National Company Law Tribunal (NCLT) exposures and fraud accounts in many banks.

“We expect all PSU banks, with the exception of Indian Bank and BoB, to report losses led by elevated provisions in a muted revenue growth environment. Even as bond yields have increased post 3QFY18 levels, MTM provisioning impact is expected to be softer in 4Q, with RBI allowing banks to spread their losses over four quarters,” the brokerage firm said in quarterly preview.

“Most PSUs under our coverage are likely to report huge losses projecting slippages and credit cost has many moving parts and hence is a challenge to project. RBI’s relief on spreading MTM losses on investment comes as a relief but NCLT referred NPA provisioning, fraudÔÇÉrelated provisions and new slippages to weigh on earnings along with lack of trading gains to impact other income,” Prabhudas Lilladher said in a quarterly preview.

COMPANY LATEST PREV CLOSE GAIN(%)
ORIENTAL BANK 93.95 88.15 6.58
UNION BANK (I) 95.95 90.75 5.73
BANK OF INDIA 103.90 98.35 5.64
ANDHRA BANK 39.50 37.45 5.47
BANK OF BARODA 144.55 137.30 5.28
CANARA BANK 266.50 253.85 4.98
ST BK OF INDIA 244.75 233.35 4.89
ALLAHABAD BANK 49.40 47.20 4.66
UCO BANK 20.10 19.35 3.88
IDBI BANK 69.05 66.60 3.68
SYNDICATE BANK 54.90 53.00 3.58
PUNJAB NATL.BANK 94.30 91.05 3.57
INDIAN BANK 323.50 313.30 3.26
VIJAYA BANK 59.70 57.95 3.02
PUN. & SIND BANK 35.80 34.75 3.02
DENA BANK 18.85 18.30 3.01
CENTRAL BANK 71.00 69.15 2.68