homeearnings NewsThis fund manager expects PSU banks' profits to double this quarter and the stocks to perform further
This fund manager expects PSU banks' profits to double this quarter and the stocks to perform further
In an interview with CNBC-TV18, Gautam Duggad, Head of Research-Institutional Equities at MOFSL said that over the past year, PSU banks have been the preferred choice for investors, and he expects that there is further potential for growth in this sector.
Public sector bank stocks have exhibited significant strength on Dalal Street, outperforming their highly regarded private sector counterparts. This impressive performance can be attributed to robust earnings and the Reserve Bank of India's (RBI) efforts to enhance liquidity within the banking sector. Analysts also believe that there is further potential for growth in this sector as they expect the profits of these banks to double this quarter.
Over the past year, the Nifty PSU Bank index has surged by an impressive 77 percent, surpassing the growth of the Nifty Private Bank index, which recorded a 36 percent increase.
Over the past year, the Bank of Baroda has experienced a remarkable surge of 111 percent, while Union Bank of India and Indian Bank have both witnessed impressive increases of 103 percent and 102 percent, respectively. Other stocks within the index have also provided investors with double-digit returns.
Bank of India shares have seen a substantial rise of 83 percent, alongside Bank of Maharashtra at 83 percent, PNB at 82 percent, Canara Bank at 74 percent, Central Bank of India at 67 percent, Indian Overseas Bank at 58 percent, and India's largest lender, the State Bank of India (SBI), delivering a commendable return of 31 percent over the one-year period.
In an interview with CNBC-TV18, Gautam Duggad, Head of Research-Institutional Equities at Motilal Oswal Financial Services (MOFSL) said that over the past year, PSU banks have been the preferred choice for investors, and he expects that there is further potential for growth in this sector.
He said, “In our model portfolio revisions, we have increased the weight in PSU banks. So, we added Bank of Baroda a year back at Rs 86 in our model portfolio; now at Rs 200, we further increased the weight from 2 percent to 3 percent. In this quarter, while we are expecting strong 30 percent plus profit growth in private banks, we are expecting the profits to double in PSU banks.”
Duggad revealed that the Bank of Baroda was added to the model portfolio a year ago, showcasing the confidence in its prospects. With this addition, Duggad anticipated a significant boost to profits in PSU banks.
The optimism surrounding PSU banks stems from the expected doubling of profits. Duggad expressed confidence in this projection, highlighting the favourable conditions that could contribute to such substantial growth. These conditions include various factors such as improved asset quality, reduced provisions for bad loans, and increased credit growth.
Furthermore, Duggad emphasized that PSU banks would continue to benefit from a low base effect for the next one to two quarters. This means that the comparison of current profits to the previous year's lower base would lead to a significant percentage increase in earnings, amplifying the positive outlook for PSU banks.
The preference for PSU banks is likely driven by several factors. One such factor is the gradual recovery of the Indian economy, which has boosted credit demand and provided a favourable environment for lending institutions. Additionally, the government's initiatives to strengthen the banking sector and address issues related to non-performing assets have further bolstered investor confidence.
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(Edited by : C H Unnikrishnan)
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