Canara Bank among 4 PSU stocks that touched fresh highs

On the back of robust credit growth, rising asset quality and low valuations, state-run banks such as UCO Bank, Canara Bank, Union Bank and Punjab National Bank touched their new 52-week highs in Tuesday’s intraday trade.

Out of these four PSU banks, UCO Bank was the top gainer in the pack as it rallied over 14% to hit a fresh 52-week high of Rs 21.35. The stock also recorded its highest level in four years.

The other three PSU bank stocks also hit their multi-year highs on Tuesday. Canara Bank hit its four-year high at Rs 317.25, while Union Bank of India touched its three-year high at Rs 78.30 and PNB hit a 2-year high at Rs 48.40.

What's behind the upside?
PSU bank stocks have been running ahead of their private sector peers amid improvement in asset quality, corporate loan book and operating performance.

Global brokerage firm BofA Securities in a report said that the turnaround in PSU bank stocks has legs beyond the largest lender SBI.

It expects the valuation discount between PSU banks and private sector banks to narrow further.

"Indian PSBs have been on the path of normalisation over the past few years and it all came together in Q2, to deliver the best RoA in the past eight years. PSB's loan/PPOP growth was almost at par with private banks," BofA analyst Anand Swaminathan, said, adding that the most comforting factor was the broad-based improvement in asset quality metrics.

Last week a government notification was also issued that increased the maximum tenure of CEO and MD of public sector banks to 10 years from five years earlier. The move will help PSU lenders retain talent.

"A whole-time director, including the managing director, shall devote his whole time to the affairs of the nationalised bank and shall hold office for such initial term not exceeding five years and extendable up to a total period, including the initial term, not exceeding 10 years, as the central government may, after consultation with the Reserve Bank, specify and shall be eligible for re-appointment," the notification said.

Presently, there are many whole-time directors of PSU banks who have entered the board at a young age. The amendment is said to benefit them.

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