The recent performance of PSU banking stocks has positioned the Nifty PSU Bank index as the top-performing index among all NSE indices in 2022. Since the beginning of the year, the index has risen approximately 1,305 points, moving from 2,530.40 to 3,835 gaining nearly 51.85% of its value. During Wednesday's trade, the index gained 145 points, or 3.93%, to reach a five-year high of 3,835.20.
The profit margins of public sector banks increased in H1FY23 due to the acceleration in credit growth. There was a significant improvement in earnings reported by PSU banks in the September quarter, propelling stock prices to new highs.
Finance Minister Nirmala Sitharaman on Monday said the government's efforts to reduce bad loans are yielding results with 12 public sector banks reporting a 50% jump in combined net profit at ₹25,685 crore in the second quarter ended September, PTI reported.
Bank of Baroda stands at the top of the Nifty PSU bank index with gains of over 102.92% in 2022. The stock has risen for three consecutive trading sessions, delivering a 15.48% return after the state-owned bank reported a 59% increase in net profit at ₹3,313 crore for the September ending quarter, due to a fall in bad loans and an increase in interest income.
The bank had posted a net profit of ₹2,088 crore in the corresponding quarter of the previous fiscal. The net interest income of the bank grew by 34.5 per cent to ₹10,714 crore. Net interest margins rose to 3.33 per cent at the end of September 2022.
In Wednesday's intra-day trade, the stock set a fresh 52-week high of ₹167, and at the current trading price of ₹166.30, the stock is 115.83% higher than its 52-week low of ₹77.
Similarly, Indian Bank also set a new 52-week high of ₹269.7 in Wednesday's trade by surging 31.78% in a month. So far in 2022, the bank has returned 92.47% to its shareholders by moving from ₹139.60 to the current level of ₹267.45.
In Q2, Indian Bank reported a 13% rise in net profit at ₹1,225 crore for the September quarter 2022–23 as against a net profit of ₹1,089 crore for the year-ago period.
From ₹210 on September 28, Canara Bank's stock has risen sharply to ₹314.10 levels, delivering a return of nearly 50%. Since the beginning of 2022, the stock has returned 57% to date.
Since the release of its Q2 numbers on October 20, the stock has zoomed by 26.10% to date, gained nearly 37.13% in the last one month, and 40% over the past three months.
The bank's net profit has been steadily growing for the last ten quarters, beginning with the June 2020 quarter. In the first quarter of this fiscal year, the bank posted a standalone net profit of ₹2,022 crore, crossing the ₹2,000 crore mark for the first time.
The bank continued this trend in the second quarter by posting a standalone net profit of ₹2,525.5 crore. The bank reported a net profit of ₹1,332.6 crore in the September quarter of the previous fiscal.
Only two PSU banks, Punjab National Bank and Bank of India, reported profit declines ranging from 9 to 63% in Q2 due to higher provisioning for bad loans.
On the other hand, shares of SBI, the largest lender in India, hit an all-time high of ₹622.70 in Monday's trade after the bank reported its highest-ever net profit for the September-ending quarter at ₹13,265 crore, up 73.93% as against ₹7,627 crore in the year-ago period.
From the June mid-low of ₹434.70, the stock has risen gradually to ₹615.55, representing a return of over 41.60%. Domestic brokerages have raised their target prices on the stock following the strong Q2 results.
Motilal Oswal Financial Services said SBI remains one of its preferred picks in the financial sector. The brokerage firm has a 'buy' call on the stock with a target price of ₹700. It pointed out that SBI delivered a robust quarter led by margin expansion and lower provisions.
Emkay Global Financial Services also maintained a "buy" call on the stock and raised its target price to ₹715 from the earlier price of ₹640.
Adding to the list, domestic brokerage firm LKP Securities also initiated a "buy" call on the stock with a target price of ₹718. Trendlyne data shows that the average brokerage target for SBI is ₹687.55.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.