Shares of a large-cap banking company zoomed 48 percent in less than ten days, increasing from ₹ 32.35 to ₹ 47.95 apiece. Its shares were trading at ₹ 45.85 apiece at 01:15 PM on Thursday.
Shares of PSU Banks were on a roll this week, amid expectations of improved earnings and asset quality of state-owned banks. A few banks that witnessed a rally include Indian Overseas Bank, Central Bank of India, Punjab & Sind Bank (PSB) and Uco Bank. In fact, the shares of Indian Overseas Bank (IOB) saw a 48 percent rally in less than ten days!
IOB hit an eight-year high of ₹ 48.60 on Wednesday. The stock was quoting at its highest since April 2015. The bank saw a spike in volumes. A combined 35.44 crore shares had changed hands on the counter On Thursday.
Analysts say that the bank’s sustained improvement in earnings and asset quality, and strengthening of capital position, which is likely to be maintained over the medium-term is driving the sentiment.
“The bank has been profitable since the past three fiscals (fiscal 2021) owing to lower credit cost backed by less incremental stress as well as improving net interest margins (NIMs). With higher provisions and lower slippages, the bank is expected to maintain profitability over the medium term,” said CRISIL Ratings.
The bank’s gross non-performing assets (NPAs) eased to 7.13 per cent of the gross advances by June 2023 compared to 9.12 per cent a year ago. It reported a 28.22 percent increase in its net profit to ₹ 504.03 crores in the latest quarter, compared to ₹ 393.10 crores in the corresponding quarter last year.
With a market capitalization of ₹ 87,991 crores, Indian Overseas Bank is a large-cap company. It has a low return on equity of 1.09 percent. Its shares were trading at a price-to-earnings ratio (P/E) of 39.79, which is higher than the industry P/E of 14.87, indicating that the stock might be overvalued as compared to its peers.
The government of India holds a 96.83 percent stake in it, followed by retail investors with 2.20 percent, other domestic institutions with 1.25 percent, foreign institutions with 0.09 percent and mutual funds with a 0.08 percent stake in it.
Written by Simran Bafna
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