PSU bank stocks rose on Tuesday, with SBI in the lead, as government's talks about capital infusion in banks and cheaper valuation made these stocks attractive.
PSU bank stocks rose on Tuesday, with India’s largest bank SBI leading the Nifty PSU Bank index with gains of almost 1.59 per cent. Healthy credit growth target by the largest state-run lender for three years down the line is a positive aspect for the bank and has made SBI stock attractive, said Anita Gandhi, Whole Time Director at Arihant Capital Markets. “The bank (SBI) has guided that by 2020, it has targeted a credit growth of about 10 per cent and an ROA (return on assets) of above one per cent — which is healthy,” Gandhi told FE Online.
State Bank of India was followed by other state-run banks Oriental Bank of Commerce (up 1.15%), Bank of India (up 1%), Canara Bank (up 0.89%), Union Bank (up 0.69%) and IDBI Bank (up 0.24%). Among other PSU banks, shares of Syndicate Bank (up 0.58%), Indian Bank (up 0.23%), Punjab National Bank (up 0.49%) and Bank of Baroda (up 0.07%) traded higher. Shares of Allahabad Bank traded down by 0.33%.
“Last week, Piyush Goyal had a meeting with all the PSU bank heads and they are also in talks of bringing the PSU banks out of the existing problem of non-performing assets (NPAs). There were talks of capital infusion also. Secondly, most of them (bank stocks) are trading at a valuation that is much cheaper and going forward if the NPA provisioning norms start coming down, then we will see banks profitability improving,” said Anita Gandhi.
Another boost that came for the banking sector was the Reserve Bank of India in its last policy permitting the PSU banks to spread their losses in bonds in four quarters over the year instead of one quarter. “All these factors together cheered the sentiment of the PSU banks stocks,” she added. In the afternoon session, the Nifty PSU Bank index traded higher by 1.23 per cent.
This story was originally published on 12 June 2018 on www.financialexpress.com