Nifty PSU Bank index soars 12% in four days; SBI nears record high

Canara Bank hit a 52-week high of Rs 252.80, after rallying 6% in intra-day trade and 21% in the past four trading days.

Shares of public sector banks (PSBs) continued their upward movement for the fourth straight day, with the Nifty PSU Bank index gaining 12 per cent over this period after Canara Bank reported a healthy set of numbers for the December quarter (Q3FY22).

At 13:00 pm, the Nifty PSU Bank index, which reflects the performance of the public sector banks, was the top gainer among sectoral indices, up 2.8 per cent. The index is 5 per cent away from touching its all-time high level of 3,054.75 hit on November 9, 2021 in intra-day trade. In comparison, the Nifty50 index was up 1.7 per cent, while the Nifty Bank and Nifty Private Bank indices were up 1 per cent and 0.46 per cent, respectively, on the National Stock Exchange (NSE).

Among individual stocks, Canara Bank hit a 52-week high of Rs 252.80, after rallying 6 per cent in intra-day trade. The stock surpassed its previous high of Rs 247.60 touched on November 9, 2021. In the past four trading days, the market price of Canara Bank has surged 21 per cent after the bank reported healthy Q3FY22 earnings led by robust net interest income (NII)/ loan growth and controlled provisions.

Its NII grew 14 per cent YoY to Rs 6,946 crore due to robust loan growth and healthy margin, while NIM improved 6bp QoQ to 2.83 per cent aided by improvement in credit-deposit (CD) ratio. Its net profit more-than-doubled YoY at Rs 1,502 crore.

In Q3FY22, Canara Bank’s asset quality improved with its gross non-performing assets (GNPA) ratio reducing to 7.80 per cent, down from 8.42 per cent as at September 2021 (Q2FY22), 8.50 per cent as at June 2021 (Q1FY22) and 8.93 per cent as at March 2021 (Q4FY21). Net non-performing asset (NNPA) ratio reduced to 2.86 per cent as at Q3FY22 from 3.21 per cent as at Q2FY22, 3.46 per cent Q1FY22 and 3.82 per cent as at Q4FY21.

"Canara Bank reported healthy operating performance supported by a pick-up in loan growth, improving margins and robust asset quality. The bank has posted healthy growth in corporate portfolio while RAM continues to grow at a steady pace. Asset quality ratios improved further underpinned by higher recoveries and upgrades while slippages remained under control. Decline in SMA overdue and restructured portfolio provides comfort on asset quality trends driving a sustained reduction in its credit costs," said Motilal Oswal Financial Services in a result update. The brokerage firm maintained ‘buy’ rating on the stock with a target price of Rs 300 per share.

Meanwhile, shares of State Bank of India (SBI) were up 3 per cent at Rs 538.90, surging 9 per cent in the past four trading days. The stock of the country’s largest state-owned bank was quoting close to its record high level of Rs 542.30 hit on November 3, 2021. SBI is scheduled to announce its Q3FY22 results on Saturday, February 5, 2022.

"SBI being a government-owned entity has always traded at a discount to its private peers amid lack of clarity on the decision-making front. However, with limited government intervention now, we expect the valuation discount to ease along with SBI’s rising relevance, " said analysts at InCred Equities.

"We are convinced that the worst is already behind SBI on the asset quality front with sufficient provisioning buffer. The bank has streamlined its underwriting processes to bring discipline into sourcing and lending techniques. With limited government intervention and a rise in small-ticket loans, we expect SBI to have better quality assets", they added.