SBI, IOB, PNB shares fly high; NIFTY PSU Bank index surges 15% in a month

State-run banking stocks have delivered strong returns over the past month amid a sharp recovery in Indian equities.

Data show that the NIFTY PSU Bank index has gained nearly 7% over the past five trading sessions and around 15% in a month.

Improving Q2 earnings, a sustained improvement in asset quality, stronger balance sheets, and healthy credit growth are among the key factors supporting the rally in PSU banking stocks.

Besides these, three lenders explore equity fundraising plans to gradually reduce the government’s shareholding and comply with the Securities and Exchange Board of India’s (SEBI) minimum public shareholding norms.

The banks are Indian Overseas Bank (IOB), Punjab & Sind Bank and Central Bank of India.

While Indian Overseas Bank has received approval to raise up to ₹5,000 crore through a qualified institutional placement (QIP), Punjab & Sind Bank and Central Bank of India are also evaluating fundraising options.

The proposed share issuances could increase public shareholding in these lenders while strengthening their capital base.

Key updates you need to know

According to news reports citing the State Bank of India's Economic Research Department (ERD), public sector banks (PSBs) reported slightly stronger profit growth of 20% year-on-year (YoY) to ₹59,366 crore in the second quarter of FY27, marginally ahead of major private sector banks (PvSBs), which posted a 19.8% increase in combined profits to ₹53,629 crore.

Business growth remained healthy across both categories of banks. PSBs recorded deposit growth of 13.1% and credit growth of 18.8%.

How key names fared in Q2 FY27

SBI

The bank had earned a profit of ₹20,160 crore in the July-September period a year ago.

According to a regulatory filing, SBI's total income increased to ₹1,43,796 crore, from ₹1,34,979 crore in the second quarter of the last fiscal year.

Interest earned during the period increased to ₹1,32,019 crore from ₹1,19,654 crore in the same quarter of FY26.

Asset quality improvement

The bank's gross non-performing assets (NPAs) declined to 1.39% of gross advances as of September 30, 2026, from 1.73% a year ago.

Similarly, net NPAs or bad loans moderated to 0.36% of the advances, from 0.42%.

As a result, provisions for bad loan declined to ₹2,759 crore as compared to ₹4,132 crore in the corresponding quarter of previous year.

Punjab National Bank (PNB)

Punjab National Bank (PNB) reported a 13% rise in net profit to ₹5,532 crore for the second quarter ended September 2026 (Q2 FY27), driven by improved core income and a moderation in bad loans.

The country's second-largest public sector lender had logged a profit of ₹4,904 crore in the year-ago period.

The bank's total income increased to ₹38,185 crore in the second quarter from ₹36,214 crore a year ago, PNB said in a regulatory filing.

Interest income rose 9% to ₹34,585 crore in the September quarter of FY27 from ₹31,872 crore in the year-ago period, while net interest income (NII) rose 11% to ₹11,601 crore from ₹10,469 crore in the second quarter of last financial year (Q2 FY27).

However, operating profit grew 4% to ₹7,532 crore from ₹7,227 crore in the same quarter a year ago.

Explaining the reason for muted growth in operating profit, PNB MD and CEO Ashok Chandra said that it was due to depressed treasury income due to the hardening of interest rates.