IOB | Central Bank: PSU banks up 17%; here’s what is driving the rally

New Delhi: Public Sector Banks (PSBs) were abuzz in the early trade on Tuesday, with index constituents soaring up to 17 per cent due to a number of factors. The state-owned lenders have delivered superb earnings in the last quarter of FY 2020-21, a large part of the credit goes to the privatisation buzz, Reserve Bank of India and the Covid pandemic, and not their improved performance.

Among the PSU lenders, the

soared 17 per cent to 27.50, whereas rallied 14 per cent to Rs Rs 27.4. According to some media reports, both the lenders have been shortlisted for privatisation.

Jammu & Kashmir Bank soared 13 per cent to Rs 44.30. The lender turned profitable in the March 2021 quarter, reporting a net profit of Rs 316 crore. The board of the bank has approved the proposal to raise up to Rs 150 crore by allotting shares to employees.

Kolkata based UCO Bank climed 6 per cent to Rs 15.15 as the bank is eyeing fund raising in near future. The board will meet next week to consider raising up to Rs 500 crore as tier-II capital.

Mahantesh Sabarad of SBICAP Securities to ET Now in an interview “PSU banks have been a rank underperformer for several years now. They have been struggling with capital because NPA ratios have been very high for most of them.”

gained 5 per cent to Rs 153.30 as the bank is looking to raise Rs 4,000 via qualified institutional placement (QIP). The floor price is set at Rs 142.15 per share.

With the pandemic recovery, banks should be able to get into a recovery mode quite swiftly. The smaller PSU ones are catching up right now. So for the next 3-6 months, PSU banks would be better off relative to the market, added Sabarad.

Canara Bank, Union Bank and Bank of Baroda also jumped up to 3 per cent on Tuesday.

Ratings agency ICRA estimates 12 public banks booked profits of Rs 31,600 crore from their bond portfolio compared to overall PBT of Rs 45,900 crore in FY2021.