Nifty PSU Bank index hits over 3-year low; SBI slips 15% in a week

SBI, BOB, J&K Bank, Indian Bank, Allahabad Bank, Oriental Bank of Commerce, Bank of India and Canara Bank were down more than 3% in intra-day trade.

Shares of public sector banks were under pressure, with the Nifty PSU Bank index hitting an over 3-year low in intra-day deal on the National Stock Exchange (NSE), on Monday, after a sharp fall in sector giants like State Bank of India (SBI) and Bank of Baroda (BOB).

At 12:25 pm, Nifty PSU Bank index, the largest loser among sectoral indices, was down 3 per cent at 2,608 on the NSE, as compared to 1.4 per cent decline in the benchmark index Nifty 50.

The PSU Bank index hit an intra-day low of 2,520, its lowest level since June 24, 2016. The index has fallen below its previous low of 2,565 touched on October 26, 2018 in intra-day deal.

SBI, BOB, Jammu & Kashmir Bank, and Indian Bank slipped more than 5 per cent, while Allahabad Bank, Oriental Bank of Commerce, Bank of India and Canara Bank were down in the range of 3 per cent to 4 per cent in intra-day trade today.

Shares of SBI plunged 5 per cent to Rs 292 in early morning deal. The stock has fallen 15 per cent in the past week. The state-owned lender reported a lower-than-expected net profit of Rs 2,312 crore for the June quarter, as against a loss of Rs 4,876 crore in the year-ago period. However, the deterioration in asset quality surprised analysts.

The consensus estimate of analysts was for the lender to report a net profit of Rs 4,106 crore for the quarter.

The slippages for the reported quarter were at Rs 16,212 crore, compared to Rs 9,984 crore in the year-ago quarter and Rs 7,505 crore in the fourth quarter. The total stressed portfolio in the book is about Rs 27,000 crore.

The resolution of the three large NCLT accounts (Essar Steel, Bhushan Power and Alok Ind.) and a couple of new stress accounts (DHFL, RE account, etc.) are key for SBI to report a substantial improvement in profitability over the next two years.

Thus, any delay in resolutions and a lower-than-expected recovery would be key monitorable, analysts at YES Securities said in company report.

“While volatility in corporate slippages was not ruled out, higher slippages across non-corporate segments in Q1FY20 was a negative surprise. Factoring in higher slippages amidst a weak operating environment, we lower our RoA estimate to 0.6 per cent/0.8 per cent (from 0.8 per cent/0.9 per cent earlier) for FY20E/21E. Nonetheless, SBI remains the best bet amongst public sector banks with a strong liability franchise and better capital position,” analysts at Reliance Securities said in result update. The brokerage firm maintains ‘Buy’ recommendation on the stock with a revised target price of Rs 360 from the earlier Rs 420.

Analysts at Elara Capital expect margin expansion and contained credit cost to improve return ratios. The brokerage firm revised down FY20 estimates by 15.8 per cent and revised up FY21 estimates by 4.6 per cent. It reiterates ‘accumulate’ rating on SBI with target price of Rs 366 per share.

COMPANY	LATEST	1 MONTH AGO	LOSS(%)
INDIAN BANK	171.75	256.75	-33.11
ORIENTAL BANK	64.20	92.85	-30.86
BANK OF INDIA	68.10	90.20	-24.50
UNION BANK (I)	64.70	82.60	-21.67
ALLAHABAD BANK	36.85	46.85	-21.34
CANARA BANK	227.55	283.15	-19.64
SYNDICATE BANK	31.85	39.50	-19.37
ST BK OF INDIA	298.75	364.50	-18.04
CENTRAL BANK	17.20	20.70	-16.91
PUNJAB NATL.BANK	67.25	80.35	-16.30
J & K BANK	33.90	39.90	-15.04
BANK OF BARODA	102.65	120.50	-14.81