Nifty PSU Bank index jumps nearly 3% today, SBI among preferred stocks; check credit growth outlook

Nifty PSU Bank index jumped 2.8% to 4,377.25 today as the market mood remained positive despite mixed global cues. The NSE Nifty 50 rose 89.50 points or 0.46% to 19,412.05 and BSE Sensex soared 361.82 points or 0.55% to 65,566.87. All the banking and non-banking indices such as Bank Nifty, Nifty Financial Service and Nifty Private Bank were trading in green. The top gainers on Nifty PSU Bank were Punjab National Bank (PNB), Bank of India, Indian Overseas Bank, Punjab & Sind Bank and Indian Bank while there were no losers.

SBI, PNB, Bank of Baroda among preferred large PSU bank stocks

“Public banks have performed well post-COVID. The asset quality cycle tailwind has resulted in an improvement in NPA ratios. The corporate credit woes are behind us. Therefore we expect credit cost normalisation in the coming period. As per as growth is concerned, the PSU Banks are likely to report strong growth factoring in capex improvement. Large PSU Banks like SBIN (SBI) and BOB are also growing rapidly on the consumer credit front. Hence we expect further room for re-rating. Nevertheless, The ECL provision will be keenly watched. We prefer large PSU Banks; SBIN, BOB and PNB (considering the valuations),” said Ajit Kabi,  Banking analyst at LKP Securities.

Bank credit growth outlook

“The outlook for bank credit offtake continued to be positive due to the economic expansion, rise in capital expenditure, implementation of the PLI scheme, and retail credit push. Based on GDP forecasts, sectoral credit growth expectations and management expectations, CareEdge estimates the credit growth to be in the range of 13%-13.5% during FY24 excluding the impact of the merger of HDFC with HDFC Bank. If we include the merger, the growth is likely to be higher by around 3.0%. However, elevated interest rates and global uncertainties could impact credit growth in India. Further ebbing inflation could also reduce the working capital demand,” said analysts at CareEdge Ratings.

Brokerage call: Buy SBI

SBI – Buy – Target Price: Rs 650

“There is enough scale for the State Bank of India to expand its digital offerings and hence growth ahead. At the CMP, the scrip trades at P/ BV of 1.22x FY25E BVPS of Rs 463 and investors are advised to ‘BUY’ the scrip for a target of Rs 650,” said analysts at Ashika Stock Broking.