Public sector banks extend gain; PNB, Canara Bank up over 5%

PNB gained 15 per cent in the last week after the bank said ICRA Ratings has upgraded the ratings of Bonds issued by the Bank and reaffirmed the rating of Certificate of Deposits

Shares of public sector undertaking (PSU) banks were trading higher for fifth straight day at the bourses in an otherwise range-bound market on Friday, on improvement in solvency profile and capital position.

Punjab National Bank (PNB) and Canara Bank were up 7 per cent and 5.5 per cent, respectively, in intra-day trade. Bank of Maharashtra, Union Bank of India, Bank of India, Central Bank of India, Bank of Baroda, UCO Bank and Indian Bank were up 2 per cent to 4 per cent today.

At 02:28 pm, Nifty PSU Bank index was up 2 per cent, as compared to 0.4 per cent gain in Nifty Private Bank index and 0.12 per cent rise in Nifty Bank index, while the benchmark Nifty50 index traded at flat at 12,980 points.

In the past week, Nifty PSU Bank index has outperformed the market by surging 7 per cent, as compared to 1 per cent rise in the Nifty50 index. PNB, Bank of Baroda, Union Bank of India, Canara Bank and Indian Overseas Bank were rallied between 10 per cent and 15 per cent.

Among individual stocks, PNB was the top gainer among PSU banks, up 7 per cent to Rs 34.15 in intra-day trade today. In the past one week, the stock has gained 15 per cent after the bank said ICRA Ratings has upgraded the ratings of Bonds issued by the Bank and reaffirmed the rating of Certificate of Deposits.

The rating upgrade is based on the recent improvement in solvency profile and capital position, which is likely to sustain on the back of lower-than-previous estimated Covid-19 induced asset quality stress for the bank. Accordingly, the credit provisions and consequently the capital requirements for bank are estimated be manageable for the bank, ICRA said in rating rationale.

Since the last rating update, the Government of India (GoI) has also announced capital infusion of Rs 20,000 crore for public sector banks (PSBs) for FY2021, a part of which could also be allocated to PNB. In addition, the ability of PSBs (including PNB) to raise Additional Tier I (AT-I) bonds has also improved after they have proposed to set-off their accumulated losses against their share premium account, which could improve the bank’s ability to improve its Tier I capital position, it said.

COMPANY	LATEST	1-WK AGO	GAIN(%)
PUN. & SIND BANK	14.12	11.38	24.1
I O B	11.00	9.57	14.9
PUNJAB NATL.BANK	33.80	29.75	13.6
CANARA BANK	105.25	93.25	12.9
UNION BANK (I)	28.10	25.55	10.0
BANK OF BARODA	52.00	47.50	9.5
CENTRAL BANK	12.78	11.68	9.4
BANK OF MAHA	12.29	11.24	9.3
INDIAN BANK	67.90	63.05	7.7
UCO BANK	12.55	12.06	4.1
BANK OF INDIA	45.75	44.00	4.0
ST BK OF INDIA	245.25	242.80	1.0