Finance
By: Shree1news, 18 FEB 2021
Share prices of select PSU banks such as Central Bank of India, Indian Overseas Bank, Bank of Maharashtra, and Bank of India all hit respective upper circuits throughout Thursday’s trading session. The sharp uptick in these state-owned banks comes days after news agency Reuters reported that these could possibly be a part of government’s privatisation drive next fiscal year. Earlier, within the Union Budget, Finance Minister Nirmala Sitharman had introduced that the government will privatise 4 banks and an insurance firm.
Central Bank Of India’s share price was at Rs 24.04 per share on Thursday, whereas Indian Overseas Bank stock price was at Rs 19 apiece, both at 20% upper circuits. Shares of Bank of India hit 10% higher circuit along with Bank of Maharashtra. However, the government has still not officially announced the names of the banks it plans to privatise.
Right time to buy PSU Bank?
“I don’t see any fundamental reason to go for PSU Banks right now,” Binod Modi, Strategy Head, Reliance Securities informed . Currently, only the privatisation news is fuelling the prices of those state-owned banks, he adde. “It’s difficult to get a fair idea on PSU banks owing to the situation their balance sheets are in right now. Even RBI is cautious while talking of PSU banks, raising asset quality issues,” he added.
Earlier this month, global rating agency Moody’s mentioned that NPA risks might be easing for PSU Banks but those will continue to remain stressed due to scarcity of capital while profitability remains missing. The Government has decided to recapitalise banks, but, that’s expected to only assist them meet Basel capital requirements and not increase credit growth.
Among lenders, Binod Modi prefers large private sector banks. “Private banks look to be better. The way they’ve carried out, be it on provisions or their asset quality, it offers an edge to private sector banks,” he mentioned. In a recent report, Morgan Stanley had said that large private banks have emerged stronger post-crisis with stronger balance sheets, and growth/market share accelerating.
Source:A-N
