{"id":72175,"date":"2022-11-09T13:20:00","date_gmt":"2022-11-09T07:50:00","guid":{"rendered":"https:\/\/tradebrains.in\/features\/?p=72175"},"modified":"2022-11-09T14:06:16","modified_gmt":"2022-11-09T08:36:16","slug":"why-are-psu-banks-performing-better-than-private-banks-will-they-continue-to-do-better","status":"publish","type":"post","link":"https:\/\/tradebrains.in\/features\/why-are-psu-banks-performing-better-than-private-banks-will-they-continue-to-do-better\/","title":{"rendered":"Why are PSU Banks performing better than private banks? Will they continue to do better?\u00a0"},"content":{"rendered":"<div class=\"trade-content_2\" style=\"margin-left: auto;margin-right: auto;text-align: center;\" id=\"trade-3718160872\"><p><a href=\"https:\/\/tradebrains.in\/get\/telegram\/\"><img decoding=\"async\" class=\"alignnone wp-image-101992\" src=\"https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2023\/01\/telegram-channel-300x119.png\" alt=\"\" width=\"148\" height=\"59\" \/><\/a> <a href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMN3Epgswxc--Aw?hl=en-IN&amp;gl=IN&amp;ceid=IN%3Aen\"><img decoding=\"async\" class=\"alignnone wp-image-123430\" src=\"https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2024\/05\/follow-on-google-news-300x82.png\" alt=\"follow-on-google-news\" width=\"222\" height=\"61\" srcset=\"https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2024\/05\/follow-on-google-news-300x82.png 300w, https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2024\/05\/follow-on-google-news-150x41.png 150w, https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2024\/05\/follow-on-google-news.png 468w\" sizes=\"(max-width: 222px) 100vw, 222px\" \/><\/a><\/p>\n<\/div><p>The Nifty PSU Bank index stole the market\u2019s thunder, as it zoomed to the tune of 11% in the past week to reach 3781.90 points! This move was propelled by the pleasantly surprising results posted by index heavyweights, Bank of Baroda, Canara Bank and the State Bank of India at the beginning of this week.&nbsp;<\/p><div class=\"trade-content_7\" style=\"margin-left: auto;margin-right: auto;text-align: center;\" id=\"trade-997952078\"><!-- Composite Start --> \r\n <div id=\"M923760ScriptRootC1549812\"> \r\n <\/div> \r\n <script src=\"https:\/\/jsc.mgid.com\/t\/r\/tradebrains.in.1549812.js\" async> \r\n <\/script> \r\n <!-- Composite End --><\/div><p>The Nifty PSU Bank index outshone the benchmark indices so far this year. It rose by 49.51% year to date (YTD), which is significantly higher than a 4.77% rise in the Nifty 50 index. In fact, the Nifty PSU index dazzled in front of the Nifty Private Bank index which increased by 17.73% YTD.&nbsp;<\/p><p>Indian Bank, Union Bank of India, Canara Bank, Bank of Baroda, Bank of India, and SBI rose to the tune of 29-97% this year. All of this makes us wonder what made PSU banks perform better than their counterparts.&nbsp;<\/p><p>Historically, PSU Banks have been plagued by poor asset quality due to their reckless lending. In fact, they reported a high loan growth of ~17% from FY10-14. Hasty lending, economic slowdown &amp; RBI\u2019s asset quality review opened a Pandora\u2019s box of gross NPAs. However, the sector has witnessed a gradual improvement in gross NPAs since FY18. They are down to about ~6% levels in FY22.&nbsp;<\/p><div class=\"trade-content_5\" id=\"trade-2473226865\"><script async src=\"https:\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js?client=ca-pub-4023722985638610\"\r\n     crossorigin=\"anonymous\"><\/script>\r\n<!-- in_content_2_news -->\r\n<ins class=\"adsbygoogle\"\r\n     style=\"display:block\"\r\n     data-ad-client=\"ca-pub-4023722985638610\"\r\n     data-ad-slot=\"7925020301\"\r\n     data-ad-format=\"auto\"\r\n     data-full-width-responsive=\"true\"><\/ins>\r\n<script>\r\n     (adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script><\/div><p>PSU banks have relatively performed better than their private peers as far as corporate slippages are concerned. Once considered troublesome, their corporate book is pushing their loan growth. <\/p><p>There has been a pick up in corporate credit due to a high public, and private capex and increasing utilization of working capital limits. PSU Banks have a large pie of corporate loans in comparison to private banks, hence they are set to benefit the most.\u00a0<\/p><p>Analysts say that improving asset quality, pick-up in loan growth, better capital adequacy, and lower provisions are expected to aid the return ratios of PSU banks. Further, the market has already started discounting these positives which have resulted in an improvement in their valuations.&nbsp;<\/p><p>\u201cThe earnings outlook for PSBs continues to look good, led by an improvement across margins, operating profitability, and credit costs. The SMA pool remains benign, which coupled with limited slippages, would aid in sustained\/continuous reduction in credit costs,\u201d said Motilal Oswal Financial Securities.&nbsp;<\/p><p>VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services said that PSU banks posted better-than-expected profits in Q2, led by loan demand, better asset quality, and rising margins. He added that credit growth remained positive.&nbsp;<\/p><p>\u201cPSBs are underowned. More steam left in the stocks despite the recent rally. The valuation gap between private banks and PSB stocks will narrow,\u201d added VK Vijayakumar.<\/p><div class=\"trade-content-10\" id=\"trade-2489718069\"><script async src=\"https:\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js?client=ca-pub-4023722985638610\"\r\n     crossorigin=\"anonymous\"><\/script>\r\n<!-- in_content_3_news -->\r\n<ins class=\"adsbygoogle\"\r\n     style=\"display:block\"\r\n     data-ad-client=\"ca-pub-4023722985638610\"\r\n     data-ad-slot=\"2969612066\"\r\n     data-ad-format=\"auto\"\r\n     data-full-width-responsive=\"true\"><\/ins>\r\n<script>\r\n     (adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script><\/div><p>Analysts believe that public sector banks may continue their outperformance on a healthy outlook, and on the back of multiple positive triggers.&nbsp;<\/p><p>\u201cThe weekend saw the results of two major PSUs \u2013 SBI and BoB. Both reported strong earnings, with strong operating metrics. These fundamental metrics are likely sustainable for the two major banks, and we expect re-rating,\u201d Hemali Dhame, associate vice-president &#8211; research, Kotak Securities said.&nbsp;<\/p><p>She added that even though we saw a run-up in prices, she expects those strong fundamentals will improve the profitability of these stocks and gradually improve the probability of a re-rating.\u00a0<\/p><p><strong>Written by Simran Bafna\u00a0<\/strong><\/p><div class=\"trade-after-content\" id=\"trade-2846145937\"><div id=\"taboola-below-article-thumbnails\"><\/div>\r\n<script type=\"text\/javascript\">\r\n  window._taboola = window._taboola || [];\r\n  _taboola.push({\r\n    mode: 'alternating-thumbnails-a',\r\n    container: 'taboola-below-article-thumbnails',\r\n    placement: 'Below Article Thumbnails',\r\n    target_type: 'mix'\r\n  });\r\n<\/script>\r\n<script type=\"text\/javascript\">\r\n  window._taboola = window._taboola || [];\r\n  _taboola.push({flush: true});\r\n<\/script><\/div>","protected":false},"excerpt":{"rendered":"<p>The Nifty PSU Bank index stole the market\u2019s thunder, as it zoomed to the tune of 11% in the past week to reach 3781.90 points! This move was propelled by the pleasantly surprising results posted by index heavyweights, Bank of Baroda, Canara Bank and the State Bank of India at the beginning of this week.&nbsp; [&hellip;]<\/p>\n","protected":false},"author":5,"featured_media":31478,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[4865,31],"tags":[],"class_list":["post-72175","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-analysis","category-news"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v20.5 (Yoast SEO v25.0) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Why are PSU Banks performing better than private banks? 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