The promoters of public sector banks? (PSB) i.e. the government of India has seen its wealth increase by 63.5% during the year 2007. Positive sentiment in the bank sector share stocks, especially PSB stocks, has caused the value of the government?s holding rise.
The year 2007 has seen the banking sector gain strong momentum and the demand for PSBs was especially stronger. Due to this, the government is now richer by nearly Rs 63,426 crore on its holdings in 19 listed PSBs, all in a space of twelve months (price as of December 24, 2007).
At current market price of the shares of these PSBs, the government holding is now worth Rs 1,63,297 crore. At the start of the current calendar year, they were worth only Rs 99,871 crore.
In this, UCO Bank has reported the largest increase in wealth, with the government stake in the bank now worth Rs 3,461 crore more than it did at the beginning of 2007. From a price of Rs 21.4 on January 2, the share is currently worth Rs 57.75. In hot pursuit, is another bank in the public sector, Dena Bank, where the value of government’s holdings gained an extra Rs 662 crore during this period.
The environment for PSB stocks has been extremely favourable, with most of them recording substantially higher returns than the market as a whole.
While the BSE Sensex has increased by 42.4% to 19,854.12 on December 24,2007 from 13,942.24 on January 2, 2007, BSE Bankex gained by 55.9% to 11,101.74 from 7,120.43.
Though the share price rise has been spectacular in some other cases, they have not translated into larger wealth for the government given the inherently small size of these banks.
Thus, a bank such as Oriental Bank has seen its rise by over Rs 33.90 in terms of absolute share price, but that added Rs 434 crore in wealth. An increase of Rs 16.65 in share price in the case of Andhra Bank translated in to Rs 416 crore in incremental wealth.
Not surprisingly, SBI topped the charts, with a gain of Rs 33,822 crore in 2007. A significant contributor in government’s wealth creator, Bank of India and Bank of Baroda, which were placed second and third in terms of incremental wealth are also worth mentioning.