PSU Bank index soars 3% on BoB's strong biz update, SBI fund raising plan

In Q4, the operational performance was expected to remain positive across lenders with PSU banks seen delivering continued strong earning trajectory.

Shares of public sector undertaking (PSU) banks were in focus with Nifty PSU Bank index gaining 3 per cent on the National Stock Exchange (NSE) in Tuesday’s intra-day trade after Bank of Baroda (BoB) reported strong business growth.

The PSU lender giant, State Bank of India (SBI) is likely to raise $2 billion funds via offshore bonds. As per exchange filings, SBI said its board will meet on April 18 to consider the same. Last month, SBI had raised Rs 3,717 crore through AT 1 bond sale at a coupon rate of around 8.25 per cent.

At 09:36 AM; Nifty PSU Bank index, the top gainer among sectoral indices, was up nearly 3 per cent, as compared to 0.50 per cent rise in the Nifty 50.

Among the individual stocks, Punjab & Sind Bank surged 7 per cent, while Uco Bank, Union Bank of India and Bank of Baroda rallied 4 per cent, followed by Central Bank of India, Indian Overseas Bank, Canara Bank and Bank of Maharashtra, which were up 3 per cent each. SBI, Indian Bank, Bank of India and Punjab National Bank were up 2 per cent each.

The Executive Committee of the Central Board is scheduled to have a meeting on April 18, 2023 to examine the status and decide on long term fund raising in single / multiple tranches of up to $2 billion under Reg-S/144A, through a public offer and/or private placement of senior unsecured notes in US Dollar or any other convertible foreign currency during the Financial Year 2023-24, SBI said in an exchange filing.

Meanwhile, PSU lender BoB’s advances rose by 19 per cent on a year-on-year (YoY) basis in FY23, higher than banking system's growth of around 15 per cent for the financial year. In absolute terms, advances rose from Rs 8.18 trillion at the end of March 2022 to Rs 9.73 trillion by March 2023-end, according to a filing with the BSE.

BoB's deposits expanded by 15.1 per cent YoY to 12.04 trillion at the end of March 2023. This pace was also higher than the banking system’s 9.6 per cent YoY growth in deposits. Sequentially they were up by 4.7 per cent over Rs 11.5 trillion at end of December 2022.

According to Motilal Oswal Financial Services (MOFSL), BoB reported robust business growth, with both advances and deposits growing at a rapid pace. Retail loans continue to drive overall loan growth, while the internal book too saw strong trends. Within deposits, CASA deposits grew at a faster pace, resulting in an increase in the CASA ratio to 42.2 per cent. The brokerage firm expects margins to exhibit stable to positive trends, while controlled credit cost to drive the overall profitability.

Meanwhile, in January-March quarter (Q4FY23), analysts at ICICI Securities expect earnings momentum to continue to remain strong led by continued robust credit offtake, steady elevated margins on the back of yield repricing offsetting higher cost of deposit and steady slippages and resolutions of few stressed assets leading to stable credit cost.

The operational performance is expected to remain positive across lenders. PSU banks are seen delivering continued strong earning trajectory. Management commentary on segments to drive advance growth, liabilities accretion while margin trajectory amid rising cost of funds will be keenly watched, the brokerage firm said in result preview.