Most PSU banks have emerged as major wealth destroyers in 2019 despite recapitalisation by the government due to asset quality issues, an increase in bad loans and low profit visibility. In 2019, the Nifty PSU Bank index has lost 16 percent as compared to a nearly 10 percent rise in the benchmark Nifty50 index.
Indian Bank, Oriental Bank of Commerce, Allahabad Bank, Central Bank of India, Union Bank of India, and Bank of India have destroyed over 30 percent investor wealth in 2019 alone.
Other PSU bank stocks like Syndicate Bank, Canara Bank, Bank of Baroda, J&K Bank, and Punjab National Bank have also declined between 11-24 percent this year.
However, State Bank of India (SBI) is the only PSU bank stock that has been in the green in 2019. It has risen 8 percent since the beginning of this year. The bank hit its 52-week high of Rs 373.70 on July 18, 2019, and a 52-week low of Rs 244.35 on October 9, 2019.
In Q2, the state-owned lender’s net profit surged more than threefold during the quarter to Rs 3,012 crore. It posted a 218 percent jump in standalone net profit for the September quarter versus Rs 944.87 crore in the same quarter last year.
Under exceptional items, the bank reported a net profit of Rs 3,484.30 core on sale of partial investments in subsidiary SBI Life Insurance Company. Fresh slippages also halved to Rs 8,800 crore from Rs 16,000 crore on a quarterly basis.
“Amid a weak macro, SBI delivered a surprisingly strong quarter, especially on asset quality and margin,” Jefferies said in a note last month. While recommending a buy call on the stock, Jefferies raised its target price to Rs 385 from Rs 380.
The brokerage also revised SBI's earnings estimate upwards for the current year by 6.8 percent, factoring higher margins and proceeds from SBI Life Insurance stake sale.
Meanwhile, CLSA said that the bank remains a preferred pick among PSUs.
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