2 Public Sector Banks To Go Ex-Dividend This Week: Which Stock To Buy?

Before the stock adjusts with respect to any of the corporate action, there is a cum date i.e. the last date to buy in those shares to be eligible to get the announced dividend. Likewise, here are 2 stocks from the public sector banking space that are to go ex-dividend this week. Here are the details and which stock can be a good pick- a short brief on the same:

1. Indian Bank:

Indian Bank is a Chennai based bank established in the year 1907. The bank is turning ex-dividend for its Rs. 6.5 per share or 65% final dividend tomorrow. The record date or the date of determining shareholders' eligibility for the same is June 16, 2022.

The bank's financials are seeing an improvement with revenue as well as net income rising YoY. In the financial net income was placed at Rs. 4141.81 crore. Net profit though at the concern has nearly halved YoY from Rs. 1708.85 crore in March of Fy21 to Rs. 984.25 crore in the last March ended quarter.

Also, the bank's NPA situation has improved together with a higher RoA sequentially at 0.62%.

Strengths of the stock:

Fundamentally, the stock is trading at a TTM PE of 4 that is lower in comparison to the industry. The other positives that can be listed are a good profit over the 3-year period of 33.64%, good capital adequacy ratio of 15.71%, CASA at 42% of the total deposits. Also, loan growth has been at a good over 32% over the last 3-year period.

Limitations: Nevertheless, the weakness which also need to be factored are low ROA of just 0.5%, high NPA and increase in provisioning YoY for which you may give a stock miss as it likely impacts net earnings of any bank and hence lessens the chances of shareholder making huge gains from the scrip. In the last 1-year, the scrip has gained just over 12%

 

2. Canara Bank:

 Bengaluru headquarterd Canara Bank is the country's 4th largest nationalised bank. The company's stock shall turn ex-dividend for its again 65% or Rs. 6.5 per share dividend on June 15, 2022.The record date for the same is June 16, 2022. This is the first dividend announced by the bank in last 5 years.

The bank's March quarter results have come in far better as a result of better NIM. Profit at the concern gained over 64.9% YoY to Rs. 1666.2 crore. Both the assets and liabilities portion saw healthy growth. Also, the asset quality profile with Gross Non-Performing Assets (NPAs) declining to 7.51 per cent as at March 31, 2022 from 8.93 per cent in March 202. Its Net NPA stood at 2.65 per cent as at end of March 2022 down from 3 82 per cent a year ago.

The bank has been given a 'Buy' target by Motilal Oswal for a target price of Rs. 280, implying potential gains of 41% from the current price level of Rs. 197.6 per share. The buy has been recommended on the rationale that "the bank reported a stable operating performance supported by healthy margins, modest loan growth and strong asset quality. While corporate book saw a small decline, the bank has continued to grow RAM segment at a steady pace with contribution from
all segments. Despite elevated slippages, asset quality ratios improved further underpinned by higher recoveries and upgrades. Declines in SMA overdue and restructured portfolio provide incremental comfort on asset quality trends. We estimate an RoA/RoE of 0.7%/~13% by FY24. We maintain our BUY rating with a TP of INR280 (premised on 0.8x FY24E ABV), implying 28% upside potential.

Disclaimer:

While the above are 2 good PSBs with good margins, individuals take the buy call only after thorough analysis and the story should not be construed as an investment advice into the above mentioned scrips.

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