PSU Bank index up 4% ahead of FM press conference; SBI nears record high

A media report said the FM is expected to make announcements about a proposal to set up a bad bank

Shares of public sector undertaking (PSU) banks were in focus on Thursday with the Nifty PSU Bank index gaining 4 per cent on the National Stock Exchange (NSE) ahead of Finance Minister Nirmala Sitharaman’s media address at 5 pm today. According to media reports, Sitharaman is expected to make announcements about a proposal to set up a bad bank.

At 12:37 pm, the Nifty PSU Bank index, the top gainer among sectoral indices, was up 4 per cent at 2,506, as compared to a 0.34 per cent rise in the Nifty50 index. The PSU bank index hit a high of 2,507.80 in the intra-day trade today.

Among the individual stocks, Indian Overseas Bank, Punjab National Bank (PNB), Bank of Maharashtra, Punjab & Sind Bank and Central Bank of India were up between 5 and 7 per cent, while Indian Bank, Bank of Baroda, UCO Bank and Bank of India were up in the range of 3 to 4 per cent on the NSE.

Shares of PSU giant, State Bank of India (SBI), gained 3.3 per cent to Rs 458.75 in the intra-day trade today. The stock is trading close to its record high level of Rs 467.45, touched on August 4, 2021.

Clearing the path for the launch of National Asset Reconstruction Company (NARCL), the Cabinet is learnt to have approved the government guarantee on security receipts that will be used to buy bad loans of lenders. The Centre has earmarked about Rs 31,000 crore for this, Business Standard reported. CLICK HERE FOR FULL REPORT

Emkay Global Financial Services believes that underlying consumption demand remains strong and should bounce back as the economy opens up and as the risk of a third Covid wave moderates.

"The improvement in collection efficiencies should limit incremental stress formation, while the healthy provision cover should keep provisions in check at least for large private banks. PSBs, in general, should perform well as the transfer of non-performing assets (NPAs) to NARCL should meaningfully lower NPAs and provision burden, resulting in healthy profitability," it said.

In April-June quarter (Q1FY22), PSBs, in general, reported higher profitability, aided by better margins, one-off gains from the UB stake sale, healthy treasury gains, higher priority sector lending certificate (PSLC) fees and lower opex as the bulk of wage arrears/pension-related provisions are largely behind. Among PSBs, SBI, Bank of Baroda, Indian Bank and Canara Bank were clear outliers, the brokerage firm said in an August sector report.