Nifty PSU Bank index rally over 4%; SBI, Canara Bank, BOB up more than 4%

Shares of public sector banks have rallied by up to 5% on the National Stock Exchange (NSE), after Canara Bank reported a net profit of Rs 2.81 billion in June quarter (Q1FY19) on the back of higher net interest income (NII). Analysts on average had expected the state-owned bank to post a loss during the quarter.

Canara Bank had profit net profit of Rs 2.52 billion in year ago quarter and net loss of Rs 48.6 billion in previous quarter.

NII of the bank grew 43% year on year (yoy) at Rs 38.83 billion from Rs 27.14 billion in year ago quarter. The impressive performance in NII growth is primarily due to the 15.12% yoy growth in domestic credit backed by a whopping 36.22% growth in retail credit which in turn has contributed to the 14.87% yoy increase in interest income from advances, the bank said in a statement.

On the asset quality side, signs of recovery are visible with recovery and upgradations, backed by a strong 56% qoq improvement in cash recovery (Rs 35.37 billion) resulting in both gross and net NPAs improving sequentially to 11.05% and 6.91% respectively. As on March quarter, gross and net NPAs stood at 11.84% and 7.48%, respectively.

According to analysts at Antique Stock Broking, two large resolutions under the IBC boosted the quarterly performance as it led to far better-than-expected NII, higher recovery of Rs 5 billion from written-off loans and better recovery in NPLs.

Going forward, the brokerage firm expect resolution and development under SAMADHAN (power sector resolution if materializes) to help; however, low coverage ratio on stressed loans ex-IBC (22%), weak core PPP (1.2-1.3%) and low capital cushion (CET 1 of 9.3%) are likely to keep the performance volatile.

Post Q1 results, shares of Canara Bank have rallied 6% to Rs 273 on the National Stock Exchange (NSE). State Bank of India (SBI), Bank of Baroda (BoB), Indian Bank and Bank of India too have rallied more than 4%, while Syndicate Bank, Union Bank of India, Allahabad Bank and Punjab National Bank (PNB) were up in the range of 2% to 4% on the NSE.

At 11:05 am; Nifty PSU Bank index, the largest gainer among sectoral indices, was up 4.2% at 3,059, as compared to 0.41% rise in the Nifty 50 index. Nifty Bank and Nifty Private Bank indices were up 1% each.

COMPANY	LATEST	PREV CLOSE	GAIN(%)
CANARA BANK	273.60	258.95	5.66
BANK OF BARODA	137.25	131.80	4.14
ST BK OF INDIA	282.75	271.85	4.01
BANK OF INDIA	91.70	88.20	3.97
INDIAN BANK	343.75	331.90	3.57
SYNDICATE BANK	42.25	40.80	3.55
J & K BANK	50.10	48.40	3.51
UNION BANK (I)	84.10	81.85	2.75
CENTRAL BANK	70.70	68.95	2.54
DENA BANK	15.00	14.65	2.39
ALLAHABAD BANK	43.80	42.85	2.22
PUNJAB NATL.BANK	80.95	79.25	2.15
ANDHRA BANK	32.60	31.95	2.03
UCO BANK	18.55	18.20	1.92
I O B	14.05	13.80	1.81
VIJAYA BANK	54.70	53.75	1.77
PUN. & SIND BANK	29.20	28.80	1.39
UNITED BANK (I)	11.25	11.10	1.35
BANK OF MAHA	12.35	12.20	1.23
CORPORATION BANK	27.20	26.90	1.12