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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.

SI Reporter  |  Mumbai 

banks, bank recapitalisation, infusion, finance
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.


“Most PSBs are sitting on SLR (statutory liquidity ratio) that is significantly higher than the regulatory requirement of 19.5%. We also note that the CD (credit-deposit ratio) ratio for seven PSBs under coverage ranges between 66-76%, while LCR (liquidity coverage ratio) ratio varies between 100-147%, underscoring the surplus liquidity prevailing at these banks. This will enable a robust treasury performance, which, coupled with an improvement in PSU banks’ operating environment (slippages, loan growth, capital infusion), should enable a healthy earnings recovery for the sector,” Motilal Oswal Securities said in sector update.

Bank 26/10/2018 27/12/2018 Latest 1day 2 months
United Bank (I) 9.64 11.53 12.50 8.4 29.7
Union Bank (I) 62.20 83.75 86.85 3.7 39.6
Syndicate Bank 31.20 38.00 39.40 3.7 26.3
Corporation Bank 23.00 28.85 29.45 2.1 28.0
Indian Bank 223.00 238.90 243.60 2.0 9.2
Oriental Bank 65.90 94.85 96.60 1.8 46.6
Canara Bank 212.60 272.05 277.05 1.8 30.3
St Bk of India 248.10 291.85 297.00 1.8 19.7
Bank of Maha 10.89 14.87 15.10 1.5 38.7
Bank of Baroda 98.90 116.60 118.30 1.5 19.6
Bank of India 74.55 101.75 102.95 1.2 38.1
Allahabad Bank 36.90 46.40 46.85 1.0 27.0
Punjab Natl.Bank 65.95 77.90 78.65 1.0 19.3
Andhra Bank 25.55 29.45 29.70 0.8 16.2
Dena Bank 14.65 17.05 17.15 0.6 17.1
IDBI Bank 59.45 61.10 61.45 0.6 3.4
Vijaya Bank 40.60 50.10 50.35 0.5 24.0
UCO Bank 16.55 20.55 20.65 0.5 24.8
I O B 14.00 14.85 14.90 0.3 6.4
Central Bank 29.25 36.40 36.50 0.3 24.8
Pun. & Sind Bank 25.65 32.75 32.80 0.2 27.9
Latest price in Rs at 12:13 PM


First Published: Fri, December 28 2018. 12:27 IST
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