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

Hi All,

Not able to believe all these giants and more than 100 years old bank are crumbling like fallen glasss. Are these banks are good for nothing ? Is the NPAs are really so bad for banking that market suddenly started beating them so hard. I remember in 2011 similar thing happened when private banks has collapsed and all bank recently touched their all time highs.

Also the worst is all the analysts are silent on banks no one is telling anything on buying banks.

May be some of them might be good at certain price but it seems market is going to throw them out of then market.

Any banking expert here to put his thoughts.


KHARB/SURYA or SROUTO any thoughts here.

 

Good point. 100% Agreed I am thinking on same line. I read interview by Sandip Sabhrawala expert that PSU Banks will give positive surprise and SBI outperformer.

"SBI is perceived to have lot of problems today, but the way the management commentary goes and the way the way I look at it, I do not see SBI, at least, in the entire PSU banking space having asset quality issues from here on. So, I think that is where you will see the most positive surprise, and I would not be surprised if SBI is one of the outperformers for 2016."

https://articles.economictimes.indi...u-banks-sandip-sabharwal-asset-quality-issues

Edelweiss expert has expressed same view

"A lot is happening in this space. For small bank licenses and payment bank licenses, the game has changed quite a bit. Having said that, some of the strong franchises like HDFC Bank, ICICI Bank and maybe a few select private sector banks, should continue to do well. For a long time the valuations of some of these banks have not been cheap. Do not go by the price, look at the price to book multiples, look at the price to earning multiples, maybe HDFC Bank right now depending on where it opens and all might be between 18 to 20 times price-to-earnings one year forward. Those are not the multiples where the stock has traded quite a few times except for some at the times of financial crisis. When you get in at these valuations, you should do alright. The second opportunity is in two-three large public sector banks where the valuations have just taken a beating. The stocks are trading at 0.6-0.7 times price to book, lot has got factored in and I am very positive. When you see the kind of cleanup that has happened in some of these balance sheets and the way some of the assets are turning around, there is visibility in terms of capitalisation of some of these banks. They might be the dark horses for 2016. You might see some of these stocks rallying maybe 40-50%. Do not forget they are extremely underowned right now."

https://articles.economictimes.indi...tocks-nitin-jain-edelweiss-financial-services

IMHO best way is to do SIP in Kotak PSU Bank ETF which has large cap and midcap PSU Banks like SBI, PNB, Oriental, BOB etc.

 

If you guys follow up Howard Marks here is snippet from his memo :





I hope most of you might be following him as well
I am sure out of these three banks one must survive as these are stalwart banks may all of them survive.

Its very right time to accumulate SBI atleast.

 

SBI is the largest Bank in the Country. It has some NPA issues. But it also has labour issues. If SBI is able to merge its subsidiaries with itself, it would be better for SBI. But the Labour unions will not allow SBI to do so. RBI is trying to help the Banks to find ways to clean their balance sheets. If they are sucesfull, Banks will start performing.

 

Every bank has NPA issues, but the Govt. cant let these banks collapse. They will recapitalize them and provide greater autonomy. Govt. is the biggest stakeholder in these banks, so rest assured these banks can't collapse like Lehmann. SBI and Syndicate bank are the ones I am buying. SBI is the largest bank in India and is constantly improving its NPA problem. Syndicate has the lowest NPA and look at its dividend yield now! Almost 7% tax free returns! I expect the PSU banks to bounce back within a year as the economy cant grow without banking. Buy good PSU banks when everyone is panicking and selling!

 

I differ with your statements "but the Govt. cant let these banks collapse. They will recapitalize them and provide greater autonomy." This is a ideally correct statement. But actually, it is not possible. Govt. is run by politicians. Politicians cannot afford to provide autonomy to the Banks. Politicians want to control PSU Bank managements for their own benefit. RBI is a autonomous body but RBI also has to face pressures from the politicians in power. It is the duty of RBI to try and ensure that the bank function properly and donot crash. But can the RBI function without political interference?

But now, the banks will have to try their best to clean their balance sheets else the markets will punish them.

 

@New_Investor If you believe NaMo and his statements along with FM's statement, then you would realize that the central banks are going to get revamped in terms of their autonomy and management and we will have more people from private sector banking running the show. While "no" political interference might not be possible, you can assume certain truth in that statement.

PSU banks have already been punished by the markets and if you see then the NPAs have been already priced in. Almost all banks have fallen regardless of their NPA numbers and growth. Even banks with good track record are being sold into. Syndicate bank has been showing good credit growth and lowest NPAs but is hitting new 52 week lows, same with SBI. I am not suggesting to buy any bank, but only the ones which have shown good progress but are falling due to panic.

 

Dinesh Ji,
Market is very jittery about new RBI norms, this BS article details why banks are falling nine ninepins. Raghuram Rajan has proven to be worst governor in RBI history. He did nothing to improve the NPA situation and only gave lofty ideas about world economy. Thankfully the new govt. came which is now serious about controlling NPAs forcing RBI to come up with rules which will hit the PSU banks on the chin (literally). Had RBI been strict earlier and by itself this would not have happened.

https://www.business-standard.com/a...causing-psu-banks-to-fall-116011500638_1.html

Also there is problem of leadership. If you notice the larger banks which have fallen include SBI, Axis, PNB, ICICI are all led by females. These were all strong franchises with good deposit base. Now they are facing multiple problems. I do not want to make sexist comment but the leadership is for everyone to see. Most of the times you find their MD, CEO speaking to media and on TV speaking on general issues as this has happened, that has happened, so this will happen. I wonder if they have any time to actually look into the affairs of their banks. Even now they seemed hardly concerned or maybe they simple do not have the ability.

On the contrary look at Aditya Puri, Ramesh Sobti, Uday Kotak. They hardly give interviews which do not concern the performance of their banks. The results from HDFC Bank, Indusind, Kotak are for everybody to see. If they can control NPA and give strong results why can not the others.
Finally, do not buy Syndicate Bank as dividend yield is misleading. Like the price of bank dividend yield can change. Better buy BOB, or Canara Bank. Timeframe is at least 2 years.

 

I have large exposure to private banking that includes ICICI,Axis,HDFC bank,Kotak,Indusind ,yes bank,Fedral, DCB,IDFC bank.Fortunately I don't own PSU bank or any PSU stock of any sector as a policy .Earlier also PSU bank has big NPA issues about two decades back.But fortunately two things worked for them.After that NPA problem, their was God sent boom in real state ,and many of sick industry was sitting on huge land Banks.So many of those accounts could sold their land parcels to settle accounts and some of them even survived.Secondly again because of land and real estate boom,there was sudden consumption boom,which resulted in capacity addition by industry. This result in corporate lending.Now because real estate is down,so their is no sense (false or real only final fate of real estate will decide )suddenly all individual becoming richer.So Globaly consumption is down because of cold to real estate .2008 crisis was also due to puntured to real estate ie mortgage crisis .Actually that problem never went after that .So world is in that man made crisis due to inflated real estate prices and only time correction is answer .So I see difficult time for corporate lenders ,more to PSU becuase of natural deficiencies due to GOVT DNA and lesser to corporate lenders like ICICI and Axis type Banks.Retail majors like HDFC bank,Kotak and Indusind might smile for some more time.I do see significant recovery in private corporate lenders stocks in next finincial year after March quarter results, as NPA cat will be out by then but stocks may bottom out even before that .After that you may also see ICICI and Axis shift to retail till corporate lending improves. So privtae bank may start doing well again after March due to urban consumption boom from 7 the pay Commision ,OROP and continous urbanisation..For PSU Banks I have no comment to offer because of my permanent allergy to PSU Unefficint DNA and unfavourable environment and continous exposure to corporate and rural economy and other issues I mentioned.I don't think PSU bank are of investment grade, but definitly it can be good trading stocks to play bounce back which also I hope with in six months.But neither I trade nor I touch any PSU.

 

I absolutely agree with your statements "s dividend yield is misleading. Like the price of bank dividend yield can change. Better buy BOB, or Canara Bank. Timeframe is at least 2 years.". Just because the Company is presently paying high dividends doesn't mean that the Company can perform better in the future. Unit Trust of India was paying high dividends but then the scam was discovered and UTI crashed. The high dividend payment policy of UTI was just a eyewash to hide the scam going on in UTI.

However, I don't agree with "the new govt. came which is now serious about controlling NPAs forcing RBI to come up with rules which will hit the PSU banks on the chin (literally).". The new and old governments are equally responsible for the present state of the PSU Banks. Loan Melas, Jandhan Yojana and other social schemes (actually designed not for public welfare but to win public votes) are to a lot extent responsible for the present state of the PSU Banks. RBI has always been trying to help the PSU Banks improve but RBI, although a Autonomous Body (Mostly on paper) have their limitations. The RBI Governor and the other Big Officials in RBI are appointed by the Finance Ministry and so they cannot always cross swords with the Finance Ministry. If RBI was really autonomous body, it would have ensured that PSU Banks do not participate in Government Schemes (actually designed not for public welfare but to win public votes) which can hit them badly. So don't blame RBI or its Governor. Governments have always been forcing Cash rich PSU Companies to pay heavy dividends. RBI has to sit and watch. It can do nothing.

Regarding PSU Bank Leadership (Male or Female) are actually Government Officials. They have their limitations. Many a times they cannot speak out their honest view about a situation. They cannot cross swords with the Government. They have to think before they talk. But at the same time they cannot stay away/ hide from the media. Government, being a majority share holder in PSU Banks, is the owner of the PSU Banks. Would you talk against your Boss?

However, Private Bank leaders have more freedom of speech. That is the difference.
So please don't compare PSU Bank Leadership with Private Bank Leadership.

 

@ajay6uc

You are correct , SBI , PNB , BANK OF BARODA are strongest banks in india

but slowly collect in dips and if possible SIP method is for better choice for next 2 -3 years purpose ...

PSU banks are not stabilize at so please start after stabilization in stock ....

FII 's are large positions in PSU Banks ...so every raise there is a possibility of some selling ... so slowly collect these stocks buy with 4-5 parts .....

ALL THE BEST ......

 

@Dear RamaMurthi Sastri Challa, Do you prefer PSU Banks over private bank for long term investment, or just to play trade PSU banks for possible dead cat bounce.

 

Yes i used to trade PSU banks for short term profit purpose ...in my portfolio i have only SBI .... and I invest only in private sector banks only that is only ICICI BANK ....

 

Don't you like Axis, Kotak or Yes Bank for long term? These stocks are now falling.

 

@ Mr kharb et al. I am a long term investor who invests in the business model with future prospects in mind. I believe Capitalism can't survive without profitable banks. wrong policies will be corrected. what is required patience . which is also essential requrement of significant return. If there is no panic,there will be no huge selling resulting in mouth wattering prices for multibbagger returns. Hence I take correction as boon in disguise. Kindly dont ridicule my views

 

100% Agreed it is BIG BOON for us to buy good stocks at cheap prices

 

Big boon only for those who have cash.
Those who have will be given more.

 

This is my problem now I am almost full invested with no money to take advantage of mouth watering valuations of stocks

One idea is if you have large cap which have not fallen much you can shift to small cap which have fallen more. Many small cap/ mid cap stocks are like blue chips. EG Mindtree has shot up in crises situation so I am thinking of selling Mindtree to buy beaten small/ mid cap stocks. Not decided. Still thinking about it.

 

Generally such booms come when people are fully invested and no fuel is left to fire the rally but yes those who keep /have cash can use it for their advantage.

 

@Srouta Mukherjee
What are the beaten down small/mid cap stocks, you are looking at?