PSU banks are good bet for investors; check what may boost their performance

With the non-performing assets (NPAs) reducing, PSU bank stocks offer a good bet to investors going ahead, said an investor. Since the PSU banks have entered a phase where the NPAs have peaked out, government banks offer a large opportunity to the retail investors, Sailesh Raj Bhan of Nippon India MF told CNBC TV18. The significantly high deposit base with the PSU banks is positive, he added. On other opportunities, Sailesh Raj Bhan said that the auto stocks also offer good bet as an improvement is expected in the sector. Even the pharma stocks are likely to show improvement he said, adding that the pharma companies are expected to grow at 12-15 per cent.

The RBI report released on Tuesday said that the gross non-performing loans of banks have improved to 9.1 per cent in comparison with 11.2 per cent in FY18 as of September end. “The gross NPA ratio of all banks declined in FY19 after rising for seven consecutive years, as recognition of bad loans neared completion,” the RBI said. For PSU banks, a fall has been seen both in the gross NPAs and net NPA ratio. Even the asset quality has seen an improvement, the report added.

Also read: This one private bank has made private lender NPAs look worse than PSU banks

Meanwhile, shares of PSU banks are trading at a higher note with PSU Bank index gaining in early intraday trade Friday. The index gained ahead of a meeting between the Finance Minister and chiefs of public sector banks for Saturday. The market is also expecting the public lenders to gain from the lower yields on government bonds after the RBI, on Thursday, said in a notification that it will buy  10-year bonds worth Rs 10,000 crore simultaneously sell four bonds maturing in 2020 for up to the same amount on December 30 in the open market. The central bank conducted a similar operation earlier this week. The PSU Bank index was trading at 2,574.85, up 79.25 points, or 3.18 per cent.