PSU banks overtakes stocks ratings from Private sector peers

On broadly analysing the statistics of private and public sectors shares ratio, it has been witnessed that public sector lenders has given more volume of momentum in terms of subscription ratio. The private sector did well but was undermined by public sectors performance.

PSU banks overtakes stocks ratings from Private sector peers

As per year-to-date, the Nifty 50 gave high double-digit returns in 2023, close to 18 percent returns, whereas the Nifty Bank index gave a little over 10 percent returns. This underperformance was expected due to a moderate rise in leading private banks. Surprisingly, the Nifty PSU Bank index gave 30 percent returns, whereas the Private Bank index gave 12 percent returns.

On succinctly understanding the conceptual growth of public sector lenders, it is observed that, barring, the State Bank of India, all the other listed PSU banks rallied 22-62 percent year-to-date. Also, it is believed by certain bank entities that the current double-digit credit growth will be sustained in 2024, due to a resilient domestic economy and a gradual surge in demand from rural areas.

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The brokerage firm Motilal Oswal Financial Services is seeking scope for another round of re-rating for PSU bank stocks. It raised the target prices of SBI, Bank of Baroda, Indian Bank, Union Bank, Canara Bank and Punjab National Bank. For the top six public sector banks, Motilal Oswal estimates a net profit of Rs1.5 trillion for FY25 and Rs1.7 trillion in FY26. The brokerage has raised the target price for SBI to Rs 800 from Rs 700, for Bank of Baroda to Rs 280 from Rs 240, and for Canara Bank to Rs 550 from Rs 440. SBI is also a top pick 

PRIVATE BANKS: The private sector banks had also reported decent earnings growth, the second-rung bank stocks outperformed the large caps this year.

 

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Federal Bank, South Indian Bank, Karur Vyasa Bank, IDFC First Bank, Karnataka Bank, Dhanlakshmi Bank, RBL Bank, CSB Bank, and Jammu & Kashmir Bank gained over 13-124 per cent year-to-date.

Among large-cap banks, ICICI Bank, Axis Bank and IndusInd Bank gave 14-28 per cent returns, whereas Kotak Mahindra Bank and HDFC Bank gave just 1 percent. In the private banking space, the analyst has picked HDFC Bank, Karnataka Bank, and City Union Bank as the top picks. 

The summarising analysis of private banks outlook remains positive and expects their asset quality to remain healthy, led by superior underwriting quality and prudent provision reserves.

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