PSB index registers 10.34% weekly gain

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New Delhi | Published: May 28, 2016 7:39:58 AM

The Bank Nifty PSU index surged as much as 10.34% during the week along with a rally of more than 5% in the benchmark indices.

The Bank Nifty PSU index surged as much as 10.34% during the week along with a rally of more than 5% in the benchmark indices.

This rally in banking stocks comes at a time when most public sector banks (PSBs) posted poor Q4 earnings amid concerns over increasing stressed assets and shrinking profits.

Shares of India’s largest public sector lender, State Bank of India (SBI), climbed 14.3%, while those of Union Bank of India and Oriental Bank of Commerce surged 8.9% and 7.2%, respectively, during the week.

SBI on Friday reported a net profit of Rs 1,264 crore for the March quarter, down 66% Y-o-Y on the back of increasing provisions for stressed loans. Provisions for bad loans more than doubled from the previous year to Rs 12,139 crore.

Most PSBs on the Bank Nifty PSU index gained between 1.5% and 14.5%.

Punjab National Bank last week posted the worst-ever quarterly loss in India’s banking history after over Rs 15,000 crore of restructured loans had turned into non-performing assets.

According to Axis Capital, slippages for PSBs have significantly increased, with GNPA ratios touching double digits for many of the lenders. The sharp uptick in slippages creates hope for recovery to gain pace only in ensuing quarters, Axis Capital said in a report.

The report said the sharp gains in most PSB stocks was visible as the news regarding consolidations of state-owned banks has been gaining pace, with SBI leading the pack asking for an in-principle approval to merge five of its associate banks and Bharatiya Mahila Bank.

Gr1

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