PSU banks rally; Bank of Baroda, Bank of India hits 52-week high

Six PSU banks - BOB, BOI, IDBI Bank, Indian Bank, UBI and Vijaya Bank - have hit 52-week highs on

Shares of public sector undertaking (PSU) banks were in focus extending their rally for the third straight trading sessions post Budget.

Total six PSU banks – Bank of Baroda (BOB), Bank of India (BOI), IDBI Bank, Indian Bank, Union Bank of India (UBI) and Vijaya Bank – have hit their respective 52-week highs on the National Stock Exchange (NSE) in other wise range-bound market.

Besides these six banks, City Union Bank and Federal Bank too touched 52-week highs in intra-day trade on Friday.

At 12:45 pm; Nifty PSU Bank index, the largest gainer among sectoral indices, was up 2.1% as compared to 0.15% decline in Nifty 50 index and 0.44% rise in Nifty Bank. In past three trading sessions, the PSU bank index outperformed the market by gaining 7.7% against 1.9% rise in the benchmark index.

COMPANY	LATEST	1-WK BEFORE	GAIN(%)
VIJAYA BANK	68.10	51.75	31.59
BANK OF MAHA	34.40	29.80	15.44
DENA BANK	39.15	34.35	13.97
UNITED BANK (I)	23.80	21.10	12.80
CORPORATION BANK	49.10	43.75	12.23
BANK OF INDIA	130.75	117.05	11.70
UNION BANK (I)	159.30	143.05	11.36
ANDHRA BANK	55.80	50.75	9.95
J & K BANK	69.95	63.75	9.73
BANK OF BARODA	183.75	167.70	9.57
PUN. & SIND BANK	54.05	49.45	9.30
UCO BANK	37.20	34.15	8.93
INDIAN BANK	289.20	267.35	8.17
FEDERAL BANK	85.00	78.60	8.14
ALLAHABAD BANK	72.70	67.45	7.78
CANARA BANK	305.75	284.00	7.66
ORIENTAL BANK	127.65	118.90	7.36
PNB	147.40	137.35	7.32
DHANLAXMI BANK	25.65	24.10	6.43
IDBI BANK	83.65	79.05	5.82

The government proposed tax concession on provisions for Non Performing Assets (NPA) or bad loans. The government also proposed that tax on interest will be levied on actual receipts and not on accrual basis in respect of NPA accounts.

Presenting Union Budget 2017-18 in Parliament on Wednesday, Finance Minister Arun Jaitley said: "In order to give a boost to banking sector, I propose to increase allowable provision for Non-Performing Asset from 7.5% to 8.5%. This will reduce the tax liability of banks."

Banks’ RoA (Return on Assets) is expected to expand marginally because of proposed increase in the allowable provision for NPAs to 8.5%, according to CRISIL Research.

Allocation of funds for capitalising PSU banks seems inadequate given the high capital requirement to meet Basel-III commitments and continuous rise in gross NPAs. However, the listing and trading of security receipts issued by a securitisation or reconstruction company is a positive.

Proposals for affordable housing will give a boost to real estate, allow promoters to raise funds at lower rates for longer tenure and avail of tax benefits, and create credit growth opportunities for the housing finance industry. Bills to curtail illicit deposit schemes and confiscate the assets of economic offenders will be a positive in the long term, said CRISIL in Budget analysis.

COMPANY	LATEST	52 WK HIGH	PREV HIGH	PREV DATE
BANK OF BARODA	184.35	185.00	179.60	17-Nov-16
BANK OF INDIA	131.25	131.90	128.75	11-Nov-16
CITY UNION BANK	162.85	163.65	161.00	02-Feb-17
IDBI BANK	83.90	85.40	83.75	02-Feb-17
INDIAN BANK	289.55	291.85	288.65	02-Feb-17
UNION BANK (I)	159.30	160.40	159.60	21-Nov-16
VIJAYA BANK	68.00	70.40	64.10	02-Feb-17