PSU banks extends rally, gain up to 4%; SBI, BoB, Indian Bank hit new highs

In the past one month, the Nifty PSU Bank index has soared 12 per cent, as compared to 2.7 per cent decline in the Nifty 50.

Nifty PSU Bank index movement today

 

Shares of public sector undertaking (PSU) banks extended their rally, with the Nifty PSU Bank index hitting a new high at 9,840.25, gaining nearly 2 per cent on the National Stock Exchange (NSE) in Monday’s intra-day trade. In the past two trading days, the PSU Bank index has rallied 3.5 per cent, as compared to 1 per cent rise in the benchmark Nifty 50.

 

State Bank of India (SBI) (₹1,229.90), Bank of Baroda (BoB) (₹311.25) and Indian Bank (₹984) hit their respective new highs on the NSE in intra-day trade today.

 

Indian Bank rallied 4 per cent, while Union Bank of India, Bank of Maharashtra, Punjab National Bank (PNB), Uco Bank, Punjab & Sind Bank and Indian Overseas Bank were up in the range of 2 per cent to 3 per cent.

 

 

At 10:13 AM; the Nifty PSU Bank index, the top gainer among sectoral indices, was up 1.65 per cent, as compared to 0.54 per cent rise in the Nifty 50. In the past one month, the PSU Bank index has soared 12 per cent, as compared to 2.7 per cent decline in the Nifty 50.  CHECK Stock Market LIVE Updates 

What’s driving PSU Banks?

 

The rally in PSU banks and relative lag in private banks have compressed valuation gaps, limiting the scope for strong outperformance across coverage. A re-rating could be driven by large private banks, but it would need greater comfort and confidence in growth and NIM outlook, according to analysts at Kotak Institutional Equities. Outside of SBI, analysts like Bank of Baroda and Union Bank at current levels.

 

Amongst PSU banks, analysts at Antique Stock Broking prefer SBI due to a strong liability franchise, continued market share gains in both advances and deposits coupled with margin levers in the form of unsecured xpress credit growth and strong CA growth. The brokerage firm said they also like Union Bank of India due to expectations of strong RoA of 1.15-1.25 per cent in FY27.

 

With healthy collection trends sustaining and forward flows contained, credit costs are expected to continue to trend downwards, aiding earnings growth. The positive commentary on microfinance institution (MFI) stress gradually declining and near-normalising is encouraging, Axis Securities said in the BFSI sector outlook.

 

Similar encouraging trends are visible in the credit card and personal loan (PL) portfolio. The asset quality metrics in the secured portfolio continue to hold up well, apart from some stress cropping up in the retail-CV and smaller ticket size SME segments. 

 

However, management commentary based on on-ground checks suggests gradual improvement over the next couple of quarters. Overall, a continued benign credit costs trajectory in the secured retail and corporate segments, along with improving trends in the unsecured portfolios, should drive credit costs lower over FY27- 28E.

 

Analysts at Axis Securities believe the earnings have bottomed and expect earnings growth to be 17 per cent CAGR over FY26-28E, led primarily by credit cost improvement and a marginal uptick in NIMs. Resultantly, RoAs for private bank under its coverage are expected to improve by 15-30bps over the same period, while PSBs are expected to comfortably deliver a sustainable 1 per cent RoA.

 

SBI’s performance has been the best amongst the larger banks, and the bank remains well-poised to sustain its performance, supported by the management’s focus on deepening its liability franchise, allocating capital to higher RoRWA assets, maintaining a resilient margin profile, and leveraging tech to drive operating efficiency. Asset quality remains at decadal best levels, with credit costs remaining benign, further extending support to earnings. Thus, the brokerage firm expects comfortable RoA delivery of 1 per cent plus over FY26-28E. It has a ‘Buy’ rating on SBI with a target price of ₹ 1,280 per share.

 

Haryana de-empanels IDFC First, AU SFB for government business in state

 

The Haryana state government has de-empanelled IDFC First Bank and AU Small Finance Bank (AU SFB) for government business in the state. “No government funds shall henceforth be parked, deposited, invested, or transacted, through these banks”, the government notification, issued on February 18 stated.

 

Under the new norms, administrative secretaries can approve the opening of accounts for government schemes only in nationalised banks operating in the state, while opening accounts in private sector banks will require prior approval, the Business Standard reported. CLICK HERE FOR MORE DETAILS

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