Pvt vs Public sector banks screening : 1. Asset Quality : PSU banking space got a hit due to asset quality concerns leading to Gross NPA ratio of 2-5% with increased provisioning QoQ against better controlled NPAs by pvt. banks; 2. Valuation : PSU banks trading at merely 0.50 P/BV as noone knows how much book value will be eroded in times to come against pvt banking still trading above BVs; 3. Relative multiples : PSU banking space available between 2-6 times PE multiple against pvt banking multiple ranging anywhere above 8; 4. CAR : PSU banks thriving for equity infusion for ALM and maintaining capital adequacy and growth in advances; 5. Efficiency ratio : Both psu and pvt banks need to play hard in tuning non interest based costs to bring up profitability. In a nutshell, good quality credit growth and management action on increased NPAs only can let these institutions to survive or be prepared for bailouts.
Posted on: Sun, 10 Nov 2013 21:16:03 +0000
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