 "Public sector banks on a roll: IOB, Central Bank zoom up to 9% on July 9")
PSU bank stocks rising, Tuesday, July 9: Public sector bank (PSB) shares were among top gainers in the mid-cap space on Tuesday. The Nifty PSU Bank index gained 2 per cent to touch 7,388 level in the intraday trade on the National Stock Exchange (NSE).
With this, the Nifty PSU Bank index was trading as the top sectoral gainer on the NSE at 11:30 AM as against 0.28 per cent rise in the benchmark Nifty50 index.
Among individual stocks, Indian Overseas Bank share price jumped 9.4 per cent to Rs 67.9 per share in the intraday trade, Punjab and Sind Bank share price gained 7.6 per cent (Rs 63), Central Bank of India 6 per cent (Rs 65.58), Uco Bank 5.7 per cent (Rs 57.4), and Union Bank of India 5.6 per cent (Rs 140.79).
Share prices of Bank of Baroda, State Bank of India, Canara Bank, Punjab National Bank, Indian Bank, Bank of Maharashtra, and Bank of India added between 0.5 per cent to 3.8 per cent at the time of the writing of this report.
According to a SBI EcoWrap report, the research desk of SBI, the government should go ahead with disinvestment of public sector banks in the upcoming Budget 2024.
As per the report released on Monday, July 8, the government should take stance on disinvestment of PSBs given the financial soundness of the sector.
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That apart, it said the government should also give clear indications on how it plans to take the privatisation of IDBI Bank.
"They invited bids from buyers in October 2022. In January 2023, the Department of Investment and Public Asset Management (DIPAM) received several expressions of interest for the IDBI Bank stake on offer. We expect the government to clarify this in the Budget," the SBI EcoWrap report titled 'Prelude to Union Budget 2024-25' said.
During the interim Budget, presented in February 2024, Finance Minister Nirmala Sitharaman set a target to raise Rs 50,000 crore through divestment receipts and monetisation of public assets in the financial year 2024-25 (FY25). The government, however, avoided giving specific targets for divestment for the year.
"We have not kept a fixed target for divestment… We need to have a new paradigm in terms of thinking and not just keep on parting with that wealth in one stroke. We can always do it in a gradual, calibrated way," Tuhin Kanta Pandey, secretary, Department of Investment and Public Asset Management (DIPAM), had said back then.
Meanwhile, Budget documents showed that the revised estimate (RE) for such receipts during the current fiscal has been lowered to Rs 30,000 crore from the target set a year ago at Rs 61,000 crore, including Rs 51,000 crore for disinvestment.
Q1-FY25 result expectations
On the financial front, analysts expect the banking sector to report low single digit growth in loans and deposits in the April-to-June quarter (Q1-FY25).
Within this, analysts at Motilal Oswal Financial Services expect PSU banks, under its coverage, to report earnings growth of 11.5 per cent year-on-year.
Net interest income (NII) growth, they said, may moderate to 8.8 per cent Y-o-Y as margins maintain a downward bias. Accordingly, PSBs' earnings may clock a 17 per cent CAGR over FY24-26.
"Opex intensity will begin to ease as wage-related provisions were largely accounted for in Q3 and Q4FY24. Treasury performance is likely to remain healthy, underpinned by a decline in bond yields and buoyant capital markets. We also expect an improvement in CET-1 for select PSBs, backed by the revised investment regulations," MOFSL said.
On the asset quality front, analysts expect non-performing loans to remain stable due to an improving borrower profile and a low SMA pool, keeping slippages under control.
"However, with the ongoing developments about farm loan waivers, the outlook for asset quality will be closely monitored over the coming quarters. Besides, the ECL provisioning requirement for the next fiscal may also act as an overhang on sector performance," the brokerage added.