PSU Banks defy weak market mood: BoB, SBI, PNB surge up to 5%

Shares of public sector undertaking (PSU) banks were in focus as Nifty PSU Bank index gained over 2 per cent on the National Stock Exchange (NSE) in Tuesday’s intra-day trade in an otherwise subdued market.

Among the PSU banks pack, Bank of Baroda, Bank of India, Canara Bank, Uco Bank, Union Bank of India, Punjab National Bank and State Bank of India (SBI) were up between 2 per cent and 5 per cent on the NSE. At 10:41 AM; Nifty PSU Bank index, the top gainer among sectoral indices, was up 2.5 per cent, as compared to 0.43 per cent decline in the Nifty50 index.

However, Nifty Bank, Nifty Financial Services and Nifty Private Sector bank indices were down in the range of 0.23 per cent to 0.76 per cent.

Among individual stocks, Bank of Baroda (BoB) rallied 5 per cent to Rs 121.85 and traded near its 52-week high level of Rs 122.70 that it had touched on April 11, 2022. On July 30, 2022, BoB had reported 79.3 per cent year on year (YoY) growth in its net profit at Rs 2,168 crore in the quarter ended June (Q1FY23), on the back of dip in provisions for bad loans. The bank had posted a net profit of Rs 1,209 crore during the same period last year (Q1FY22).

The bank’s asset quality profile improved with gross non-performing assets (GNPAs) at 6.26 per cent till June 2022 from 8.86 per cent in the year-ago quarter. Net NPAs, too, dipped to 1.58 per cent in June 2022 from 3.03 per cent a year ago. CLICK HERE FOR FULL REPORT

Analysts at ICICI Securities believe that the bottom of NPA issue will lower credit costs. “Gradual pick-up in corporate book coupled with healthy offtake in retail segment to lift overall growth trajectory. While the faster repricing of loans in rising rate scenario to aid margin trajectory. We expect return ratios to improve, thereby, aiding valuations,” the brokerage firm said.

Shares of SBI were up nearly 2 per cent to Rs 542.55 in intra-day trade. The stock of India’s largest PSU bank quoted close to its record high of Rs 549 that it had hit on February 7, 2022. In the past one month, SBI outperformed the market as it surged 16 per cent, as against 9.5 per cent rise in the Nifty50 index.

SBI is the largest bank in India with a balance sheet size of over Rs 5.4 trillion (as of March 2022). It has a healthy retail portfolio and best operating metrics among PSU banks.

On August 6, 2022, The Central Board of the SBI is scheduled to meet to consider financial results of the Bank for the quarter ended June 30, 2022 (Q1FY23).

SBI has delivered a strong performance amid a challenging macro-environment led by steady business and revenue growth and controlled provisions. The management expects the momentum to remain healthy as utilization levels improve, while retail growth is likely to remain steady.

“SBI continues to strengthen its balance sheet and improve return ratios. The focus remains on building a superior loan book, while maintaining strong underwriting as evident in lower stressed assets and higher PCR. This has aided in a sustained turnaround in operating performance and will drive return ratios to long-term average and possibly higher,” analysts at Motilal Oswal Financial Services said.

That apart, they also believe that a higher mix of floating loans and CASA will support margins in a rising interest rate environment. While asset quality remains healthy with a low restructured book and SMA pool, analysts expect credit cost to be controlled at 1 per cent in FY24, enabling 28 per cent earnings CAGR over FY22-24.

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