Joined: 10/Feb/2010
Location: India
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Posted: 03/Aug/2012 at 2:58pm
Among all banks, allahabad bank is the one with deep value. Its adjusted book value is Rs.200 - adjusted for all NPAs. Price is 130! Earns reasonable Roe of 22%. A back of the envelope calculation suggests, it should be valued at 1.5x abv ie at around 300 assuming cost of equity of 15%. A potential 2-3 bagger.
Joined: 10/Feb/2010
Location: India
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Posts: 195
Posted: 11/Aug/2012 at 11:30am
Deduct net NPAs (available in all quartely results) from latest networth. Divide by no of shares. Thats ABV. Back of the envelope value for a bank with RoE > CoE is ABV*RoE/CoE.
Joined: 10/Feb/2010
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Posts: 195
Posted: 12/Aug/2012 at 6:05pm
In laymen terms, CoE is the minimum return you expect from your investment. In financial theory, it can be calculated using CAPM model. Google CAPM if u want to know more about it.
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Joined: 05/Oct/2006
Location: United States
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Posts: 355
Posted: 10/Nov/2013 at 9:53am
How will the recent guidelines by RBI for entry of foreign banks affect PSU Banks? Many foreign banks are infact closing retail operations!
Also well run banks such as Karur are having a tough time dealing with NPAs, so what is the fate of the PSU banks?
I recall recently that Chanda Kochar of ICICI Bank said the bank would focus on the retail segment as they can still pay the EMIs..so are private sector banks too in some kind of distress?
Finally the Bank Index seems to be on an upswing and most bank stocks have risen in the last 3-4 months...so is a turnaround expected in the banking industry?
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