PSU banks extend gains; Canara, PNB, Vijaya,Syndicate Bank hit 3-month high
United Bank of India, Union Bank of India, Corporation Bank, Indian Bank, OBC, BOI, BOB, Central Bank of India and SBI were up more than 1% on NSE.
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Illustration by Ajay Mohanty
Shares of select public sector undertaking (PSU) banks were trading higher for the third straight day on the report that the central government would release Rs 286.15 billion before the end of this month towards a fresh tranche of funds to recapitalise state-run banks. The sharp moderation in bond yields should significantly boost the treasury performance of the banking sector, especially public sector banks (PSBs).
Canara Bank, Punjab National Bank (PNB), Vijaya Bank and Syndicate Bank hit their respective three-month highs in intra-day trade on Friday. These stocks were up in the range of 1% to 4% on the National Stock Exchange (NSE).
Besides these four banks, United Bank of India, Union Bank of India, Corporation Bank, Indian Bank, Oriental Bank of Commerce (OBC), Bank of India (BOI), Bank of Baroda (BOB), Central Bank of India and State Bank of India (SBI) gain between 1% to 8% on NSE.
At 12:13 pm, Nifty PSU Bank index was trading 1.6% higher at 3,098 points, as compared to a 0.96% rise in the Nifty 50 index at 10,884 points. In the past two months, PSU bank index rallied 20% against 8.4% gain in the benchmark index.
The yields on G-Sec bonds of different maturities have declined sharply and are now below Mar’18 levels (except 1-year G-Sec yield). The yields on 3-year/10-year G-Secs have moderated by around 95bp/79bp over 3QFY19 YTD.
Motilal Oswal Securities said that seven PSBs – Bank of Baroda, BOI, Canara Bank, Indian Bank, SBI, Punjab National Bank and Union Bank of India – under its coverage reported treasury gains of Rs 3.8 billion in 1HFY19 v/s Rs 175.7 billion in 1HFY18. In addition, the MTM losses in 1HFY19 stood at Rs 147.1 billion, while a few PSBs are yet to provide the balance losses as they chose to amortize the same.
The brokerage firm expects this trend to now reverse and banks to report healthy write-backs of investment provisions that they have been making. SBI followed by Canara Bank and Union Bank will benefit the most.
Canara Bank, Punjab National Bank (PNB), Vijaya Bank and Syndicate Bank hit their respective three-month highs in intra-day trade on Friday. These stocks were up in the range of 1% to 4% on the National Stock Exchange (NSE).
Besides these four banks, United Bank of India, Union Bank of India, Corporation Bank, Indian Bank, Oriental Bank of Commerce (OBC), Bank of India (BOI), Bank of Baroda (BOB), Central Bank of India and State Bank of India (SBI) gain between 1% to 8% on NSE.
At 12:13 pm, Nifty PSU Bank index was trading 1.6% higher at 3,098 points, as compared to a 0.96% rise in the Nifty 50 index at 10,884 points. In the past two months, PSU bank index rallied 20% against 8.4% gain in the benchmark index.
The yields on G-Sec bonds of different maturities have declined sharply and are now below Mar’18 levels (except 1-year G-Sec yield). The yields on 3-year/10-year G-Secs have moderated by around 95bp/79bp over 3QFY19 YTD.
Motilal Oswal Securities said that seven PSBs – Bank of Baroda, BOI, Canara Bank, Indian Bank, SBI, Punjab National Bank and Union Bank of India – under its coverage reported treasury gains of Rs 3.8 billion in 1HFY19 v/s Rs 175.7 billion in 1HFY18. In addition, the MTM losses in 1HFY19 stood at Rs 147.1 billion, while a few PSBs are yet to provide the balance losses as they chose to amortize the same.
The brokerage firm expects this trend to now reverse and banks to report healthy write-backs of investment provisions that they have been making. SBI followed by Canara Bank and Union Bank will benefit the most.