Every value investor today must be in a dilemma what is the basic
difference in modus operandi of a public and a private sector bank that
on the one hand PSU Banks command a valuation of 5-6 times earnings
while public sector banks anywhere in the range of 15-30 times. Recent
slippages in the asset qualities of public sector banks, reducing CASA
ratios, reducing NIMs, and a moderating ROA and ROE ratios have weighed
heavily on the valuation of PSU Banks. Even at such compelling
valuations, investors choose to stay away from such stocks. Will these
banks be able to bounce back in future given their strong retail base,
government support, already high CASA ratios, huge network (of branches
and ATMs) remains to be seen. While the overall future looks promising,
the counter will attract investors only if these Banks are able to show
reduction in NPAs, arrest reduction in CASA deposits, and report
improvement in profitability (NIMs, ROA, ROE etc.) for a quarter or two.
However a look at the table below clearly shows the valuation difference even among private sector Banks. While on the one hand KMB trades at ~ 40 times earnings , on the other hands strong franchisees like AXIS bank trade at just ~ 12 times earnings. Such kind of mis-pricing definitely provides an investing opportunity to a value investor
However a look at the table below clearly shows the valuation difference even among private sector Banks. While on the one hand KMB trades at ~ 40 times earnings , on the other hands strong franchisees like AXIS bank trade at just ~ 12 times earnings. Such kind of mis-pricing definitely provides an investing opportunity to a value investor
| Name | CAGR | PE | PB | ROA | ROE | NIMs | NPAs | |
| Income | PAT | ratio | ratio | Avg 5 years | Gross | |||
| HDFC | 28% | 34% | 31.1 | 5.4 | ~1.65% | ~ 17.5% | 4.20% | 1.00% |
| ICICI | 1% | 12% | 18.4 | 2 | 3.80% | |||
| Axis | 34% | 41% | 13 | 2.4 | 1.55% | 19.50% | 3.40% | 1.10% |
| IndusInd | 31% | 53% | 23.1 | 4.1 | 3.20% | 1.00% | ||
| Yes Bank | 57% | 60% | 15.9 | 3.3 | ~1.5% | ~ 20.0% | 2.90% | 0.24% |
| Karur Vysya | 30% | 26% | 9.8 | 1.8 | ||||
| SBI | 21% | 19% | 12.1 | 1.3 | 4.40% | |||
| BOB | 27% | 38% | 6 | 1.1 | ~ 1.1% | ~20.6% | 3.20% | 1.50% |
| PNB | 27% | 26% | 5.2 | 1 | 1.25% | 21.00% | 2.90% | |
| IDBI | 29% | 33% | 6.4 | 0.7 | 2.50% | |||
| Corporation | 30% | 29% | 4 | 0.7 | 2.30% | 0.90% | ||
| UCO | 23% | 33% | 4.3 | 0.8 | 3.50% | |||
VIJAY
