PSBs in focus: SBI, BOB up 2%, Indian Bank hits record high; here's why

Business Standard

2 days ago

Public sector banks share price today
Shares of public sector banks were in focus, with the Nifty PSU Bank index gaining 2 per cent on the National Stock Exchange (NSE) in Monday's intra-day trade after State Bank of India (SBI) reported healthy business growth and operational performance aided by treasury gains.
Shares of Indian Bank hit an all-time high of ₹667.75, as they rallied 3 per cent on the NSE in intra-day trade. SBI, Bank of Baroda, Union Bank of India, Punjab National Bank, Canara Bank and Bank of India were up in the range of 1 per cent to 2 per cent.
At 10:22 AM; Nifty PSU Bank index, the top gainer among sectoral indices, was up 1.8 per cent, as compared to 0.19 per cent gain in the Nifty 50.
Q1 results, brokerages view - SBI
In the April to June 2025 quarter (Q1FY26), SBI, the country's largest lender, reported healthy business growth and operational performance aided by treasury gains. The bank reported a 12.5 per cent year-on-year (Y-o-Y) rise in net profit to ₹19,160 crore, driven mainly by robust treasury gains. Sequentially, profit was up 2.78 per cent from ₹18,643 crore in Q4FY25.
Credit growth remained healthy at 11.6 per cent Y-o-Y, driven by MSME, agri, and retail segment, while corporate growth continued to remain slower. Deposit accretion was strong at 11.7 per cent Y-o-Y, led primarily by term deposits (14.2 per cent Y-o-Y). Asset quality stayed robust with slippages at 75 bps vs 84 bps in Q1FY25, GNPA and NNPA remained flat at 1.83 per cent and 0.47 per cent.
Net interest margin (NIM) contracted 10bp QoQ to 2.9 per cent, but management expects a gradual recovery in FY26, supported by improved liquidity from CRR cuts, moderation in deposit cost, and benefits from the recent capital raise.
Steady performance despite headwinds showcases resilience. Business growth with focus on RAM segment with relatively resilient margins aided by diversified loan mix and consistent strong asset quality reinforce robust operating profile, ICICI Securities said in a note.
Credit growth stood at 12 per cent Y-o-Y, with the unsecured Xpress Credit book remaining flat, while a robust credit pipeline is expected to support a healthy outlook over FY26. Domestic CD ratio remains benign and will be supportive of incremental credit growth. Despite elevated slippages (seasonal trend in Q1), the bank does not anticipate any material stress across lending segments, Motilal Oswal Financial Services (MOFSL) said.
Overview - Banks
In Q1FY26, margins for all banks experienced contraction due to repo rate cuts; margins are likely to further moderate in Q2 as the effect of the rate cuts is yet to be transferred. Most banks expect earnings growth to bottom out in the H1FY26, with credit costs likely to improve as stress in unsecured lending subsides, MOFSL said.
The recent balance sheet repair and improving profitability levels with most PSBs crossing 1 per cent RoA mark, has supported PSB's capitalization levels and enabled them to deliver an improved growth trajectory. FY25 thus stood as the first year in the past fifteen years when PSBs grew at a faster pace than Private Banks.
The credit growth gap between Private banks and PSBs has narrowed significantly in recent years. While private banks consistently outpaced the system through much of the past decade, FY23-25 marked a clear shift as PSBs regained balance sheet health, strengthened their capitalization levels, and reported a strong turnaround in sector profitability, the brokerage firm said in a financial sector update.
MOFSL expects PSBs to continue reporting moderate growth in the medium term and factor in 10-13 per cent loan growth over FY25-28 across its six coverage PSU banks. While PSBs are now structurally sound, their growth runway appears steady rather than steep, reflecting stability more than scale-led acceleration, it added.