PSU Banks soar: PNB, Indian Bank, Central Bank, PSB, BOI zoom up to 4%

The Nifty PSU Bank index rose sharply at 2.66 per cent against 1.01 per cent rise in the Nifty50 benchmark index. A total of 1,86,178 shares worth 12.61 crores changed hands intraday

The public sector undertaking (PSU) banks were trading higher on the National Stock Exchange as investors continue to remain bullish on the banking sector among PSUs.  

The Nifty PSU Bank index rose sharply at 2.66 per cent against 1.01 per cent rise in the Nifty50 benchmark index. A total of 1,86,178 shares worth 12.61 crores changed hands on Thursday's intraday trade.

All 12 PSU banks listed under the index were trading in green, with Punjab National Bank (PNB) and Indian Bank soaring 4 per cent each at Rs 121.25 and Rs 488.85 respectively. 

Shares of Central Bank, Punjab and Sind Bank and Bank of India were trading 3.7 per cent, 3.6 per cent and 3.3 per cent higher on the NSE respectively. Whereas Indian Overseas Bank, Bank of Baroda, Canara Bank and State Bank of India among others were up in the range 1 per cent to 3 per cent on Thursday’s intraday deals. 

 

According to a recent report by brokerage firm Motilal Oswal the market cap of public sector banks (PSBs) has grown at a robust pace in recent years, and is up 5 times since FY20 at Rs 17,000 crore. 

Recent capital raises and prior recapitalisation support by the government have strengthened PSBs’ capital adequacy ratios, enabling them to deliver healthy loan growth and cleanse their balance sheets, the report noted.

“The PSU banks have seen a huge turnaround, from record losses to record profits, as their aggregate earnings crossed the 1,000 crore mark in FY24. The strong earnings recovery is attributed to steady credit growth, significant improvements in asset quality, and stable to positive margins. We note that PSBs reported higher earnings in FY23-FY24 than in the past one decade,” wrote Nitin Aggarwal, Dixit Sankharva and Disha Singhal in a report.

The analysts estimate an adjusted book value for its coverage of PSBs to register a healthy CAGR of 18 per cent over FY24 to FY26

The brokerage maintained that sustained and consistent performance on return ratios and a conducive macro-environment can drive further re-rating of the sector. It recommends SBI and Union Bank as its top picks.