I have better things to do in life than buy PSU Banks: Porinju
“Do you find value in PSU Banks and would you be a buyer,” Tanvir Gill asked in her usual charming yet straight-forward style.
Porinju was uncharacteristically contemptuous about PSU Banks.
“I really would not be doing anything in PSU banks because I have better things to do in life. So I would like to keep out because there is no clarity. Even though I might have taken some stand in the past, on short-term basis on that valuations but from an investment perspective the investors have much better things to do,” he said @ 5.15.
Porinju’s aversion for PSU Banks is surprising because he had earlier recommended a buy of these stocks.
Some under-owned PSU Banks could surprise you with a responsible Government in New Delhi!
— Porinju Veliyath (@porinju) February 2, 2017
When the stocks had surged in the wake of the recapitalization announcement, Porinju had claimed due credit for his clarion call.
Expected the move sometime back! https://t.co/A98TVNfbfU
— Porinju Veliyath (@porinju) October 25, 2017
It is not known what has changed in the interregnum for Porinju to adopt such a radical change in stand about the prospects for PSU Bank stocks.
PSU Banks’ survival is at stake and so their culture will change: Shyam Sekhar
In sharp contrast to Porinju’s aversion, Shyam Sekhar made it clear that he is very gung-ho about PSU Bank stocks especially given that the private sector banks are demanding exorbitant valuations.
“ .. post recapitalisation, the one time book would probably be on a better wicket while for the five times book guys, nothing much changes about their business, just their balance sheets look better and definitely they look richly valued,” he said.
He propounded the theory that because the survival of the PSU Banks is at stake, they have no option but to become efficient.
“Once you know that your very survival is threatened, I think that the culture will change much faster. So, to say that the culture will completely die is a bit of an extreme thinking in my opinion and you can see id some of the corporate sector banks are definitely showing serious intent to change. For example, banks like SBI, Bank of Baroda are moving towards products and giving more investment options to their clients. A lot is happening and the market in all its noises is not paying heed to that”.
He also opined that PSU Banks would become as efficient as the insurance companies and mutual funds.
“If you remember how the insurance companies work or how the mutual funds work before privatisation, we are in that kind of a moment as far as public sector banks are concerned,” he said.
Shyam also recommended that investors buy a basket of PSU bank stocks, such as an ETF, to benefit from the large-cap and small-cap stocks.
He is also quite aggressive in his outlook.
After debating me on PSBs, a leading banking FM reportedly yelled "what the f£#k does he know?"
Today, his virgin knowledge just got taken.
— Shyam Sekhar (@shyamsek) October 25, 2017
You seem highly convinced; you should short SBI on a five year basis. Will be great to see what happens.
— Shyam Sekhar (@shyamsek) October 25, 2017
I prefer to play the economy through assets side instead of liabilities side: Kenneth Andrade
Kenneth Andrade of Old Bridge Capital has always been allergic to PSU Bank stocks even when they were quoting at trough valuations.
“I could play the economy through the liability side or I could put my mind to work on the asset side of the balance sheet which is manufacturing sources, consumers etc. or I could buy the financial services side of the business. I traditionally like the asset side of the business because there are many leverages that is created on the liability side actually transfers demand growth to any of the brick and mortar businesses that are there,” he said, hinting that there is no point in asking his opinion whether PSU Bank stocks are a good buy now.
PSU Banks rally is a “one-time pop up” and not sustainable: Nischal Maheshwari
Nischal Maheshwari of Edelweiss Securities does not have a high opinion of PSU Banks as a viable investment option.
“.. most of the PSU banks the one-time pop-up has already happened. Going ahead, I still believe that there is going to be a couple of quarters of pain going ahead because they have to now start taking the write offs … The recapitalisation money first will go into taking care of the NPAs and after that the expansion is going to happen,” he said in a dismissive tone.
“.. it is going to be a cautious outlook as far as PSU banks are concerned. We still favour the private sector banks and the NBFCs over PSU banks,” he added for good measure.
In the light of the conflict of opinion amongst the experts, it is better that we err on the side of caution and not dabble in PSU stocks. There are greener pastures where we can graze and hope to pocket a few bucks without putting our meager capital to risk!