| Author |
Message |
nav_1996
Senior Member
Joined: 08/Sep/2006
Online Status: Offline
Posts: 803
|
   Posted: 12/Oct/2010 at 12:35pm |
|
PSU banks have run-up a lot and appear expensive. But most of them trade at P/B valuation of <2 . This is not high if NPAs are low, reasonable growth, good NIM. Bamks like J&K are quoting a forward P/B of 1. So this may be a case of rerating and when re-retaing happens comparing with old valuation makes no sense as new valuations become base. e.g. Hawkins is not going to trade below PE of 10 now. Marico use to quote at PE of edible oil company but quotes at FMCG PEs now.
|
 IP Logged |
|
|
|
 |
|
studentoflife
Senior Member
Joined: 06/Mar/2009
Online Status: Offline
Posts: 313
|
Posted: 14/Oct/2010 at 8:36am |
|
http://economictimes.indiatimes.com/opinion/interviews/Auto-PSU-banks-to-stay-ahead-Rajat-Rajgarhia--Motilal-Oswal-Securities/articleshow/6751130.cms
|
|
First step towards learning is the realization that you do not know anything.
|
|
IP Logged |
|
|
|
prabhakarkudva
Senior Member
Joined: 16/Jan/2008
Location: India
Online Status: Offline
Posts: 1624
|
Posted: 15/Oct/2010 at 3:12pm |
Originally posted by nav_1996
PSU banks have run-up a lot and appear expensive. But most of them trade at P/B valuation of <2 . This is not high if NPAs are low, reasonable growth, good NIM. Bamks like J&K are quoting a forward P/B of 1. So this may be a case of rerating and when re-retaing happens comparing with old valuation makes no sense as new valuations become base. e.g. Hawkins is not going to trade below PE of 10 now. Marico use to quote at PE of edible oil company but quotes at FMCG PEs now. |
Cannot compare a commodity business like banks to FMCG brands.Bank valuations are driven by credit growth and NIM both of which are cyclical.
|
|
Take your chances and keep them in a box until a quieter time.
|
|
IP Logged |
|
|
|
prabhakarkudva
Senior Member
Joined: 16/Jan/2008
Location: India
Online Status: Offline
Posts: 1624
|
Posted: 15/Oct/2010 at 3:28pm |
Originally posted by studentoflife
http://economictimes.indiatimes.com/opinion/interviews/Auto-PSU-banks-to-stay-ahead-Rajat-Rajgarhia--Motilal-Oswal-Securities/articleshow/6751130.cms
|
Our research analyst friend says," Our report states
that the average credit to GDP multiplier in the last 5-10-15 years is
averaging at 2.9x. Assuming that the GDP grows at 8-8.5%, you, at
least, have 20% base case growth rate for the system. PSU stocks are
trading at 7-9x earnings or 1.3-1.5 times price to book, which makes
them very attractive. They are definitely expensive when you compare
them with their historical multiples, but these stocks are still
getting discovered over this cycle"
So he is using historical data to justify credit growth and disregarding historical data to justify valuation.
|
|
Take your chances and keep them in a box until a quieter time.
|
|
IP Logged |
|
|
|
Mohan
Senior Member
Joined: 09/Feb/2007
Location: United States
Online Status: Offline
Posts: 1855
|
Posted: 15/Oct/2010 at 11:43pm |
Originally posted by prabhakarkudva
So he is using historical data to justify credit growth and disregarding historical data to justify valuation.
|
Sounds to me like he is talking his ( MOST )book . 
|
|
Be fearful when others are greedy and be greedy when others are fearful.
|
|
IP Logged |
|
|
|
ppmatkari
Groupie
Joined: 31/Dec/2009
Location: India
Online Status: Offline
Posts: 65
|
Posted: 31/Oct/2010 at 12:02pm |
|
Performance of bank of baroda, allahabad bank, PNB, central bank has been exceptional over the last few quarters they are due for a rerating, they deserve a PE expansion.
|
|
IP Logged |
|
|
|
prabhakarkudva
Senior Member
Joined: 16/Jan/2008
Location: India
Online Status: Offline
Posts: 1624
|
Posted: 25/Nov/2010 at 10:09am |
Originally posted by prabhakarkudva
Although banks like HDFC bank,Axis Bank might do relatively well from a business point of view i am worried about the PSU and other lower rung banks that have run up like anything.Something like Syndicate Bank (an average performer) which has hardly performed is up some 25-30% in the last one month.I think its better to tone down expectations and avoid exposure to mediocre banks at these levels.
|
I started this thread after i had a detailed discussion with my father who is an experienced banker and he told me nothing great is happening in terms of credit growth in PSU banks to justify the valuations.Although only the sentiment has changed now but there is no denying that there was froth and it is getting taken out now.
|
|
Take your chances and keep them in a box until a quieter time.
|
|
IP Logged |
|
|
|
excel_monkey
Senior Member
Joined: 17/Nov/2009
Online Status: Offline
Posts: 1281
|
Posted: 25/Nov/2010 at 10:14am |
I agree banks should correct 50% from here
to provide me with an entry
Originally posted by prabhakarkudva
Originally posted by prabhakarkudva
Although banks like HDFC bank,Axis Bank might do relatively well from a business point of view i am worried about the PSU and other lower rung banks that have run up like anything.Something like Syndicate Bank (an average performer) which has hardly performed is up some 25-30% in the last one month.I think its better to tone down expectations and avoid exposure to mediocre banks at these levels.
|
I started this thread after i had a detailed discussion with my father who is an experienced banker and he told me nothing great is happening in terms of credit growth in PSU banks to justify the valuations.Although only the sentiment has changed now but there is no denying that there was froth and it is getting taken out now. |
|
|
IP Logged |
|
|
|
Active Topics
Memberlist
Calendar
Search
Help
Register
Login
