PSU banks jump up to 10% on good earnings

MUMBAI: Shares of public sector banks jumped after the second-biggest lender by assets Bank of Baroda, and Oriental Bank of Commerce reported better than expected earnings and due to early signs of concrete action by government to revive the banks. Bank of Baroda jumped 10% to Rs 168, Oriental Bank rose 4.4% to Rs 164, Punjab National Bank gained 9% and Dena Bank rose 4% .

“PSU banks rallied over short-covering amid buzz of re-capitalisation” said Sudip Bandyopadhyay, managing director & CEO, Destimoney Securities. “However, tough times ahead for them as it will take few years to improve their credit profile.’’

Other than better than expected earnings, the government has also shown that it is on course to change the nature of PSU banks by appointing two private sector bankers as the chief executives at Bank of Baroda and Canara Bank.

Ranjan Dhawan, MD & CEO of BoB, said the bank will float a subsidiary for activities related to financial inclusion such as opening banks accounts under the Jan Dhan Yojana. “It would be similar to payments banks but it will also do lending business,’’ said Dhawan.

“We have made a proposal to the RBI for the same.” But bad loans continue to be an issue. For BoB, goss bad loans at Rs 17,274 crore were 4.13% of total loans at the June quarter end.

“All corporates are not out of woods. Whether they would be NPA or not, I do not know. But hope is not written off,” said Dhawan.

“Slippages have been higher, around Rs 1,600 crore, mostly because of two major accounts which contributed around Rs 640 crore,” said Animesh Chauhan, MD & CEO of Oriental Bank of Commerce.