New Delhi: The Nifty PSU Bank index reached an all-time high of 3,310 on Friday, rising 3% in intraday trade on expectations of robust operational performance in the September quarter for the fiscal year 2022–23. Shares of public sector undertaking (PSU) banks were on the rise (Q2FY23).
The Nifty PSU Bank index surpassed its prior peak, reached on September 15, 2022, of 3,267.95. The index has increased by 12% over the past week, compared to the Nifty 50’s 3% gain. Today’s intra-day activity on the NSE saw gains of more than 3% for Indian Bank, Uco Bank, Punjab & Sindh Bank, Bank of India, Canara Bank, Union Bank, and Bank of Maharashtra. The gains for Punjab National Bank, Bank of Baroda, Indian Overseas Bank, and State Bank of India (SBI) ranged from 2% to 3%.
Analysts anticipate PSU banks to report treasury gains or the reversal of treasury losses in Q2FY23 along with a moderating of yields. As a result, other income ought to increase significantly over time. The brokerage firm anticipates NIMs, or net interest margin, will hold stable quarter over quarter (QoQ), at about 3%. With lowering gross non-performing assets (GNPAs) and lower credit costs, asset quality may improve QoQ. According to analysts, earnings could improve as NII and fee income increase due to controlled operating expenses.
According to Prabhudas Lilladher analysts in their Q2 earnings preview report, loan growth at PSU banks may be in line with the system while NII growth may be higher, at 15% year over year (YoY).
While everything is going on, Indian Bank, one of the individual equities, rises 7% on the NSE and reaches a 52-week high of Rs 235.90. Within the last week, the stock has soared 22%. In today’s intraday session, Canara Bank also increased 5% to Rs 270.60, rising 19% in the previous week. The stock was trading close to its February 3, 2022 high of Rs 272.80, which was a 52-week high.
Canara Bank reported a strong performance in Q2FY23, with net interest income (NII) increase of 19% year over year (YoY) and an 8bp margin expansion. Overall earnings were fueled by this, along with solid treasury gains and growth in fee income. The amount of new slippages remained consistent at Rs 3,950 crore, and throughout the quarter, asset quality ratios improved due to solid recoveries and upgrades of Rs 3,400 crore and greater write-offs of Rs 2,800 crore.
According to a result update from Motilal Oswal Financial Services, Canara Bank reported a strong operating performance that was aided by ongoing loan growth momentum and an improvement in asset quality, while margin expansion fueled NII.
Given the environment of rising rates, the bank anticipates margins to stay strong. The corporate segment dominated loan growth, and the prognosis is positive as Canara Bank targets a respectable double-digit increase in FY23E. Slippages remained unchanged sequentially, therefore higher recoveries and upgrades helped asset quality ratios to rise even further. According to the trading business, the overdue SMA decline and reorganised portfolio offer some additional comfort regarding asset quality developments. It keeps the stock with a “buy” rating and a target price of Rs. 340 per share.
Inching closer to its record high level of Rs 578.65, which it reached on September 15, SBI shares were up about 2% at Rs 565.55. The stock has increased 7% during the last week. In spite of the bank’s cautious optimism towards the corporate and SME segments as interest rates rise, rating agency Fitch anticipates that SBI’s retail division will continue to be the main growth engine. Due to its moderate capitalization, which forces it to maximise capital utilisation, the bank is particularly concerned with credit quality.
