Market treating SBI/PNB/Bank of Baroda like Lehman brother !

yes brother i like all but in my portfolio only one stock i take ....

 

Thanks everyone for their opinions. Just would like to clarify that the assumption here is that the NPAs have been more or less priced in, and the bad debts are peaking out in the PSU banks. I think the worst that can happen is that banks will write them off and take a hit on their balance sheets, you will see some stocks crash and then eventually they will rally. Syndicate has the lowest Net NPAs at around 2% and their advances grew 17% as opposed to 10% for the rest of the banks. I am NOT saying that BoB and PNB are worst than syndicate. I just believe in Syndicate more and thats it. BoB and PNB can be better but I am not betting on them looking at their numbers, thats it. Lets all buy and mint money from the PSU banks while other fret and stay on the sidelines. All the best folks!

 

JP Associates , UB Group and other industrial NPA 's are very high nearly 4 lakh crores and PSU banks are mostly maintain their with other incomes and investment returns .... quality of those banks are not up to the mark ...
My main assessment is if " china Economy enter into rescission it is second largest economy in the world and affect must take all countries including india , if china decrease its currency value indian and also Asian countries exports also effected , and all industrial slow down leads to increase banks NPA 's again .....
main point is FII 's having main and large positions in PSUs , if they want to take money back , they book profits in those only .....

I think every high their is a chance of selling presser in Indian market

 

I think JP account may be recovered due to hard assets to a great extent slowly, but many metal and ub may give big hit as money may have just evouprated in thin air without trace

 

yes if china price down in all products and decrease currency value and dump their products to other countries , mainly our industries effect significantly and NPA problem to banks increase ...

my view is crude price fall means all world industrial growth falling ...that is biggest problem ...
india may get crude fall benefit but all countries currency devaluations lead to big problem in future ....

" china is second largest economy in the world , and Europe is also not settled , and USA Economy is average "

 

In an interview last month the very revered Rakesh Jhunjhunwala had this to say

On market is underestimating the problem with private banks

Rakesh Jhunjhunwala: It depends. In certain private banks, such as HDFC and Kotak, they do not have any problem, others I do not know. I do not think HDFC and Kotak will have problems.

And on being asked If the bad news is yet to come ( related to banking) :

Rakesh Jhunjhunwala: The bad has come, the worst is yet to come.

Looks like we are now hearing the footsteps of the worst coming.

I had posted this in another thread in December too... And hey looks like RJ has got it right this time around on the banking sector

 

@Dear Darth,Welcome back.In my view ICICI bank and Axis bank will be best stock to play bounce back in market in large cap and can be invested in four tranches in Jan on days exactaly after declaring results,Feb,March,April on the day of declaring results. .Contrary to RJ but in next two years I expect these two now from beaten down level to outperform safer retail HDFC bank and Kotak.but for long term like 3 to 5 or beyond years HDFC bank,Kotak may be better.But I am not a banking expert.

 

I tend to agree but thats more of a positional play which you seem to allude too. For me its always been HDFC Bk, Indusind, Kotak and Yes (core) and maybe SBI on the fringe. The guys here are the best and are hardcore bankers. ICICI will give you returns but it not a scrip which enthuises confidence. Certainly not a bank with things under control

 

Just a few general observations on the thread
- that NPA's have been priced in has been a voice thats been heard regularly even as late as Nov2015, but if i am not mistaken the PSU Banking Index cracked over 25% since then. The point is do we really know the real size of this NPA problem?
- second, no bank will simply write off the outstandings. They will stick to the existing provisioning guidelines and the process will extend over about 2 years for a 100% writeoff of now indentified NPA's
- third, NPA's isnt the only problem the PSU banks face. To comply with some of the big and dynamic regulations proposed means these bank will need to transform and change the way they do banking and any change is not just long drawn but also painful and entails costs.
- the current RBI governor ( and he is by far the best we have had in the last 2-3 decades, though some may brand him the worst ever) has set out to cleanse the malaise that ails the PSU banks. this to ensure our banking system remains robust, is able to absorb any systemic risk and puts individual banks on a firmer footing. If this means forcing balancesheet cleanups, enpowering boards, having professional inductees, getting banks to adopt more sophisticated ( but in reality the right and relevant ) processes and models be it around risk management, capital management, loan and product pricing etc etc, and the list can keep going on... So be it. This was long overdue and is certainly not the creation of either the RBI or its Governor. The RBI is and has been one of best Central Banks theworld over. Anyways its mandate is to watchover, supervise and manage the financial system and its participants ( banks and FI's) and not actually run or advise them how to run.
- minting money - definitely yes after the recent fall. But apart from any bounceback it should be with a rider that the minting could be a while away ( unless we are the RBI which owns the Mint )
- everyone has his/her own preferences based on their judgements and they should be welcomed. For me its always been HDFC Bank, Indusind, Kotak and Yes (core) and mayb SBI on the fringe

 

@darth no doubt what you are saying is correct and to certain extent the whole PSU bank crash is related to these points that you have raised. What we are assuming and betting on is that these things have already been factored in an in fact many banks are oversold now and therefore open up value buying. Sure this is a not a 2 month gain story, but more like a 2 year story. HDFC Bank, Kotak and Yes are good banks but rich in valuations for me (PE-23 even in this fall). SBI and Syndicate are quoting at 7 and 3 pe respectively. I feel i'll get a better return from them in the next 2 years.

 

I understand what you are saying and am so very tempted to move a portion of my core to the likes of the stock you mention atleast for the S/T ( i actually started a seperate thread about should one sell HDFC Bank blah blah). PE's of 7 or 3 are a dreamlike situations. But the entire thesis is built on that the entire problem is priced in already and inherently assumes the road forward is an expressway without any further hiccups. The current economic scenario (local and global) doesn't suggest that in my view and so atleast I am hesitant to take a longer term commitment on PSU banks apart from SBI. For short term the temption to sell my HDFC or ITC is pretty high to enter into good names beaten down or oversold in this crack

 

@darth sure. I am also against buying each and every PSU bank. I am buying the ones I am more comfortable with. Risk/reward ratio is better now I feel, but of course I may be quite wrong. SBI and Syndicate for me. HDFC is a safe bet but it hasn't moved much if we see year on year (although other banks have crashed, so HDFC is still better I think) but I can't expect more than 20% from it in a year, whereas I believe that with SBI and Syndicate 30-50% upside. So placing my bets there. I mean who really knows what will happen.

 

Bang on Dinesh. Exactly the reason why I am thinking of selling HDFC Bank and ITC too and switch the funds to stocks with a higher upside potential in the short term. As an aside have you ever looked at the company Control Print?

 

Yes. I have. Control print is an interesting business. OPM and revenue growth is great. Definitely a company worth investing. The kind of boom that we are going to see in the packaged goods business is huge I think. The company's products are in application in every domain! Drugs, FMCG, Wiring products you name it! This correction can be a great opportunity to get in. I hope comes around 15 PE to make me buy it. I am really not comfortable above that though. If you are thinking about buying it, then I would say this is a company with futuristic and unique business model with high margins.

 

I tried this earlier. I sold HDFC Bank and bought small cap/ mid cap stocks. Now I am in big soup because HDFC Bank has remained stable but midcaps have lost huge. I think some stocks strong must be ANCHOR for portfolio. Such stocks must never be sold.

 

Have already started accumalating this one over the last couple of days for exactly the same reasons you cite. Also limited competitors and domestically driven . So no China or Global overhang too. I tend to be not to fussed about PE's. At times I just goahead if the business/product appeals to my common sense.

 

Sirjee, was it a case of you getting the entry point wrong when you tried it earlier or you executed it under circumstance similar to ones prevailing now?

 

@darth I dont blame you. A good business is always worth it, and generally commands good PE anyways. I will look at it around 7200 nifty (if we reach there) and will buy on dips. All the best!

 

I had made a comment on performance of RBI and some banks. The results are for everyone to see. Everybody is entitled to his opinion but I have noticed that banks became serious on NPA problems only after new govt. Came to power. I agree it is not the job of RBI to check bank NPAs as it is regulator not promoter. The govt is promoter and perhaps that is the reason why it is making the effort to do so. Which is reason why there will always be govt interference though the Jan dhan scheme is not responsible for NPAs it is corporates as ramamurthy ji pointed out. As far as leadership goes i stand by my comment. The market recognizes this as well. As far a buying banking stocks are concerned I think buying larger banks is a better idea for trading but if you are a long term buy and forget buy the three I mentioned . five years later check them I am 99% sure they would better than any other banking stock

 

50% of the bank accounts opened under Jan dhan yojana are empty (Zero balance). Banks don't earn anything but still have to spend on maintenance of these accounts. There are also other schemes (designed for wining votes) which are more problem creating for the banks. Off course to add to that some semi corporates and corporates have willfully defaulted in repayment of loans. Vijay Malya has properties in India and abroad. He spent crores of rupees for celebration of his 60th birthday. But he has no money to pay bank dues. Government cannot force him to repay his loans. He is benefited by his political contacts and loopholes in our laws. There are many such Malyas who have willfully defaulted their loans.