Back5 PSBs outperform markets, hit new 52-week highs. Do you own any of them?
A list of 5 PSBs even outperformed benchmarks by touching a new 52-week high. Major of these PSBs were in focus due to their Q2 earnings. These 5 stocks ended on the upside by 4-10% on Dalal Street.
PremiumIndian markets extended their gains for a second consecutive day on Monday with Sensex and Nifty 50 crossing over the 61,100 and 18,200 marks respectively. Banking stocks led the rally with public sector banks outperforming. A list of 5 PSBs even outperformed benchmarks by touching a new 52-week high. Major of these PSBs were in focus due to their Q2 earnings. These 5 stocks ended on the upside by 4-10% on Dalal Street. Going forward, analysts are optimistic about most of these stocks and have suggested buying.
Here's how these 5 PSB stocks have performed on November 7:
Indian Bank:
This Chennai-based PSB on Monday closed at ₹259.85 apiece up by 4.17% on BSE. Earlier, in the day, the stock touched a new 52-week high of ₹269 apiece. Its market cap is around ₹32,362.79 crore.
In a year, Indian Bank shares have climbed by over 47% on Dalal Street.
During the second quarter, Indian Bank posted a 12% yoy growth in net profit to ₹1,225 crore, while net interest income (NII) soared by 15% yoy to ₹4,684 crore. Advances increased by 14% yoy to ₹4,37,941 crore in Q2FY23, while deposits jumped by 7% yoy to ₹5,88,860 crore. Gross NPA declined by 226 basis points to 7.39%, and net NPA dipped by 176 basis points to 1.5% year-on-year in Q2 of FY23.
In its report, Anand Rathi said, "Higher NIM and good fee income growth kept Indian Bank’s operating performance strong with its C/I ratio coming under 45%. However, higher credit costs (~2%) led to muted profitability, with the RoA at 0.7%. Slippages were elevated; however, higher write-offs led to improved GNPAs. Ahead, we expect slippages to moderate as most of the stress has already been recognized. Besides, we expect the bank to gain market share from its peer PSBs. We retain our positive view on it, at a TP of Rs290, valuing it at 0.6x P/ABV on its FY25e book."
Bank of Baroda:
BoB closed at ₹158.35 apiece up by 9.55% on BSE. The shares had touched a new 52-week high of ₹161.75 apiece earlier on Monday. Its market cap is around ₹81,888.52 crore.
In a year, BoB shares have grown by nearly 50% on D-Street.
In the second quarter of FY23, the bank registered a standalone net profit of ₹3,312.42 crore up by 58.70% yoy, and NII jumped by 34.47% yoy to ₹10,174.46 crore. Provisions and contingencies in Q2FY23 stood at ₹1,627.46 crore as compared to provisions of ₹2,753.59 crore in Q2FY22. In percentage terms, gross NPA was at 5.31% in Q2FY23 -- dropping sharply from 8.11% in Q2FY22 and 6.26% in Q1FY23. Global advances soared by 19% yoy and deposits registered 13.6% yoy growth.
Prabhudas Lilladher analysts in their report said, "with stable earnings profile, we expect RoA/RoE near 0.9%/15% for FY24/25E. Valuation at 0.8x Sep’24 ABV is attractive suggesting a discount of 40% to SBI, which should narrow. Rolling forward to Sep’24 ABV, we raise multiple from 0.9x to 1.0x and TP from Rs130 to Rs190. Upgrade to BUY."
Union Bank of India:
The Mumbai-based PSB rose by 6.07% to end at ₹58.55 apiece on BSE. The stock had touched a new 52-week high of ₹59.10 apiece on Monday. Its market cap is around ₹40,017.45 crore. In a year, Union Bank shares have jumped by nearly 9%.
Union Bank announced its Q2 results last month. During Q2FY23, the bank garnered a net profit of ₹1,848 crore up by 21.07% yoy, while net interest income (NII) came in at ₹8,305 crore higher by 21.61% yoy. Gross NPA (%) reduced by 419 bps on YoY basis to 8.45% and Net NPA(%) reduced by 197 bps on YoY basis to 2.64% as of September 30, 2022.
In its latest report dated November 6, Motilal Oswal analysts said, "UNBK has been reporting a healthy performance over the past few quarters with earnings driven by strong NII, expansion in margins, higher other income, and moderation in provisions. Fresh slippages have been moderating, which coupled with healthy recoveries and upgrades have resulted in an improvement in asset quality ratios well ahead of its target set for FY23E. Further, a low SMA book (0.57%) and controlled restructuring (2.6%) provides a better outlook on asset quality. Loan growth has picked up well and has been broad-based with focus to remain on further credit growth improvement.
Further, the brokerage's note said, "We estimate loans to grow at ~12-13% over FY23-24 with an RoA/RoE at 0.8%/13.9%, respectively, by FY24. We maintain our BUY rating with a TP of ₹65 (premised on 0.6x FY24E ABV)."
Canara Bank:
On Monday, Canara Bank shares ended at ₹309.45 apiece higher by 4.23% on BSE. The bank had touched a fresh 52-week high of ₹311.80 apiece earlier in the day. Its market cap is around ₹56,138.26 crore. In a year, the shares have soared by nearly 27%.
Further, on Monday, the government appointed former TCS vice president Vijay Srirangan as a part-time Non-Official Director as well as Non-Executive Chairman on the Board of the bank. Also, yesterday, the bank announced that Jagdish Chander General Manager is the incumbent replacing AV Rama Rao, Chief General Manager, as the Group Chief Risk Officer.
During Q2FY23, Canara Bank reported an 89% yoy rise in net profit to ₹2,525 crore, and total income soared to ₹24,932.19 crore versus ₹21,331.49 crore in Q2FY22. Gross NPA improved to 6.37% in Q2FY23 versus 8.42% in Q2FY22.
LKP Securities in its report post Q2 said, "factoring near term capital infusion, we expect the bank’s loan book to fatten cautiously at CAGR of ~20% over FY22-24E, led by RAM and corporate book growth. In our opinion, the bank’s credit cost will normalise further by FY23E, and estimate return ratio ROA/ROE of 1.2% and 18.9% in FY24E. We value the standalone entity with 0.6xFY24E BVPS ( ₹538) and arrive at a target price of ₹323."
Bank of India:
BOI shares closed at ₹70.60 apiece up by 5.45% on BSE. The stock hit a new 52-week high of ₹71 apiece earlier on Monday. Its market cap is around ₹28,971.18 crore.
In a year, BOI shares have jumped by nearly 12% on D-Street.
Last week, Bank of India announced that the board has approved the raising of Tier-1 Capital by issue of Basel III compliant Additional Tier-I (AT-I) bonds up to ₹2,500 crore in one or more tranches.
The bank has also announced its financial performance for the second quarter last week. In Q2FY23, the bank registered a net profit of ₹960 crore down by 8.65% yoy but higher by 71% sequentially. NII stood at ₹5,083 crore up by 44% yoy and 25% sequentially. Meanwhile, the gross NPA ratio stood at 8.51%, down by 349 bps yoy in Q2, while the provision coverage ratio came in at 88.96%.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
