Public sector bank (PSB) stocks saw a rise on Tuesday, July 9, with the Nifty PSU Bank index gaining 2 per cent to reach 7,388 on the National Stock Exchange (NSE). This made the Nifty PSU Bank index the top sectoral gainer on the NSE at 11:30 AM, outperforming the Nifty50 index.
Individual PSB stocks also saw significant gains, with Indian Overseas Bank, Punjab and Sind Bank, Central Bank of India, Uco Bank, and Union Bank of India all showing positive movement in their share prices.
Other banks such as Bank of Baroda, State Bank of India, Canara Bank, Punjab National Bank, Indian Bank, Bank of Maharashtra, and Bank of India also saw increases in their share prices at the time of reporting.
A report from SBI EcoWrap suggested that the government should proceed with the disinvestment of public sector banks in the upcoming Budget 2024. The report highlighted the financial soundness of the sector and also called for clarity on the privatization of IDBI Bank.
In the previous interim Budget, Finance Minister Nirmala Sitharaman set a target to raise Rs 50,000 crore through divestment receipts and monetization of public assets in the financial year 2024-25. However, specific targets for divestment were not provided.
Analysts expect the banking sector to report low single-digit growth in loans and deposits in the Q1-FY25. PSU banks are expected to report earnings growth of 11.5 per cent year-on-year, with net interest income (NII) growth projected to moderate to 8.8 per cent Y-o-Y.
On the asset quality front, analysts predict that non-performing loans will remain stable due to an improving borrower profile and a low SMA pool. However, developments regarding farm loan waivers and the ECL provisioning requirement for the next fiscal are factors that will be closely monitored.
Overall, the banking sector is expected to see positive growth and performance in the coming quarters, with improvements in earnings and asset quality.