PSU banks extend gain; Allahabad Bank, PNB surges over 50% in one month

Allahabad Bank, Canara Bank, Bank of India, Union Bank of India and PNB were up more than 3% each on the NSE.

Shares of public sector undertaking (PSU) banks continued their northward journey with most stocks trading higher on the National Stock Exchange (NSE) in an otherwise subdued market on Thursday.

At 11:49 AM, the Nifty PSU Bank index was up 1.8% at 2,934, as compared to 0.01% fall in the Nifty 50 index. The PSU bank index is trading at its highest level since December 2015 on the NSE.

Allahabad Bank, Canara Bank, Bank of India, Union Bank of India and Punjab National Bank (PNB) were up more than 3% each, while State Bank of India (SBI), Bank of Baroda, Syndicate Bank, IDBI Bank, Oriental Bank of Commerce (OBC) and Andhra Bank were up 1%-3% on the NSE.

Since June 13, the PSU bank index surged 18% after the Reserve Bank of India (RBI) introduced "sustainable structuring of stressed assets" which allows banks to do deep restructuring of stressed projects without any management change. The benchmark index was up 5%, while Nifty Bank index gained 6% during the same period.

Since then, Allahabad Bank and PNB have rallied more than 50% each, while Indian Bank, Dena Bank, OBC, Vijaya Bank, Bank of India and United Bank of India surged between 30%-50%.

According to Nomura, PSU banks have been very conservative on non performing assets (NPA) recognition in 2HFY16 and they are nearing the end of the NPA recognition cycle.

“PSU banks have front ended a large part of stressed asset recognition and now unrecognised stress remains very low as compared with private corporate banks,” the brokerage firm said in a recent report.

“The government and the RBI have taken several positive measures, in tandem, like “Scheme for Sustainable Structuring of Stressed Assets” (S4A), Strategic Debt Restructuring (SDR), 5:25 refinance scheme, Bankruptcy Law etc. These steps will help in faster resolution of the banks’ bad loan problems,” Sharekhan said in a Q1 results preview of banking & NBFC.

Emboldened by these moves, banks too have significantly increased their loan recovery efforts, which should help to gradually reduce and eventually resolve the headline gross non-performing assets (GNPA) numbers in the long term, added report.

In Q1FY2017, while the GNPA levels may increase, the gross stress addition is likely to see improvement on a sequential basis before tapering off in the medium term, the report suggests.

Bank	29/02/2016	13/06/2016	LTP	% chg*	%chg#
PNB	71.00	83.00	131.30	58.19	84.93
Allahabad Bank	43.35	52.05	81.95	57.44	89.04
St Bk of Mysore	368.75	452.90	682.15	50.62	84.99
Indian Bank	76.05	105.45	155.70	47.65	104.73
Dena Bank	26.00	29.40	41.65	41.67	60.19
Oriental Bank	76.45	89.25	125.70	40.84	64.42
Vijaya Bank	31.10	31.25	42.70	36.64	37.30
St Bk of Bikaner	470.15	499.05	679.00	36.06	44.42
United Bank (I)	17.95	18.10	24.50	35.36	36.49
Bank of India	83.30	87.30	116.20	33.10	39.50
S B T	366.50	392.20	511.85	30.51	39.66
Canara Bank	158.45	192.65	248.05	28.76	56.55
Andhra Bank	46.10	49.95	62.60	25.33	35.79
UCO Bank	31.70	36.20	45.25	25.00	42.74
Corporation Bank	32.00	35.20	43.80	24.43	36.88
Syndicate Bank	51.10	65.95	80.10	21.46	56.75
Bank of Maha	28.70	28.90	34.50	19.38	20.21
Central Bank	58.55	87.85	104.85	19.35	79.08
Union Bank (I)	106.95	118.55	139.05	17.29	30.01
Pun. & Sind Bank	32.15	44.35	50.95	14.88	58.48
IDBI Bank	58.55	66.45	76.05	14.45	29.89
St Bk of India	158.75	201.80	230.45	14.20	45.17
Bank of Baroda	131.90	146.10	163.45	11.88	23.92
I O B	24.25	25.80	28.10	8.91	15.88
J & K Bank	63.35	64.65	70.15	8.51	10.73
Nifty PSU Bank	2037.10	2478.75	2934.05	18.37	44.03
Nifty 50	6987.05	8110.60	8518.65	5.03	21.92
LTP : Last traded price on NSE in Rs at 11:49 AM
* % change over June 13, 2016; # % change over February 29, 2016