2 PSU Stocks You Could ‘Bank’ Upon

livemint.com:

Public sector undertaking (PSU) banks have been on investors’ radar over the past 6-8 months, given the attractive valuations they trade at and a revival in their earnings. And in the past few days, two PSU banks – Union Bank of India and Canara Bank – have reported strong operational performance in the June 2023 quarter. Investors on Dalal Street are optimistic that the growth momentum of these PSU banks will continue during the current financial year.

On Monday, Canara Bank reported a 74.8% year-on-year (YoY) growth in its net profit to ₹35.3 billion (bn) in the June 2023 quarter, helped by a steady growth in net interest income (NII). NII jumped 27.7% YoY to ₹86.7 bn in the quarter under review. A fall in provisions and contingencies also helped, that fell 26.3% YoY.

The Bengaluru-based bank saw its net profit go up 86.7% YoY during the financial year ended March 2023. The PSU bank also grew its loans by 14.5% YoY to ₹8.55 trillion (tn) in the first quarter of the current financial year helped by continued buoyant demand for retail loans. Meanwhile, in the case of Mumbai-based Union Bank of India, it had reported a growth of 107% YoY in its net profit to ₹32.4 bn in the June 2023 quarter, helped by a 13.9% YoY growth in its advances and loans to ₹7.7 tn.

Union Bank of India has guided for loans/advances growth of 10-12% YoY during FY24 and its gross NPAs going below 6% vis-à-vis 7.3% during June 2023 quarter. However, the rising cost of deposits from customers could result in the Mumbai-based bank’s net interest margin (NIM) weakening to 3% levels vis-à-vis 3.1% in the first quarter of FY24. In the case of Canara Bank, net NPAs are expected to come down to 1.2% during FY24 versus 1.57% in the June 2023 quarter and it