RBL, IDBI Bank surge up to 10%; Karur Vysya, Federal Bank hit 52-week highs

Shares of select mid and small-sized banks rallied up to 10 per cent on the National Stock Exchange (NSE) in Thursday’s intra-day trade on the back of heavy volumes.

RBL Bank, DCB Bank, Equitas Small Finance Bank, South India Bank, Citi Union Bank and IDFC First Bank from the private sector gained between 3 per cent and 10 per cent.

Karur Vysya Bank (up 9 per cent at Rs 69.40) and Federal Bank (up 2 per cent at Rs 116) hit their respective 52-week high. Late billionaire investor Rakesh Jhunjhunwala held over 3 per cent stake in both these banks at the end of the June quarter, the shareholding pattern data shows.

Union Bank of India, Bank of India, Canara Bank, Punjab National Bank, Indian Overseas Bank, Uco Bank, Central Bank of India and Bank of Baroda from the PSU pack were up 2-5 per cent. At 11:25 am; the Nifty PSU Bank index, the top gainer among sectoral indices, was up 2.3 per cent as compared to a 0.25 per cent rise in the Nifty50.

Among the individual stocks, IDBI Bank soared 10 per cent to Rs 44.25, surging 13 per cent in the past two trading days on report that the government is considering selling at least 51 per cent in the state-backed lender. The average trading volumes on the counter jumped an over four-fold with a combined 35.5 million shares having changed hands on the NSE and BSE.

“Officials in the government and the state-backed Life Insurance Corporation of India, which together own about 94 per cent of IDBI Bank’s shares, are in talks about how much of their stakes they plan to sell,” reported Bloomberg quoting sources. CLICK HERE FOR FULL REPORT

Shares of RBL Bank hit an over four-month high of Rs 132.75, up 9 per cent in intra-day trade on the back of an over three-fold jump in trading volumes. A combined 89.52 million equity shares representing 15 per cent of total equity of private lender changed hands on the NSE and BSE. The stock was quoting its highest level since April 13, 2022. In the past four trading days, it has zoomed 35 per cent from a August 22 level of Rs 98.25.

RBL Bank is expected to adopt a more calibrated-growth approach in FY23 and beyond, unlike in the past. The bank expects around 15 per cent (+/-10 per cent) growth in FY23 on a low base, but estimates sustainable growth of 20-25 per cent thereafter, analysts at Emkay Global Financial Services said in a management meet update.

“We believe the current dismal valuations (0.4x FY24 ABV) largely ignore the new management’s strategy (which is appropriate in our view) that focuses on sustainable growth/returns now and be more regulatory-compliant v/s the previous high-risk/high-return strategy that partly led to regulatory intervention. We also take comfort from bank’s higher capital level (Tier I -16 per cent). Thus, we recommend Buy on RBL Bank for investors who are ready to see through the near-term transitional pain for reaping gains in the long term,” the brokerage said. The stock, however, is currently above the target price of Rs 125 per share.