Time To Buy Bank & NBFC Stocks: Microsec

Smart Investors must always be ahead of the curve. With the interest rate cycle close to peaking, the time is ripe for investors to buy stocks of Banks & NBFCs at beaten down valuations says Microsec

Bank & NBFC stocks have been very adversely affected in the latest stock market downturn. Apart from domestic concerns related to Political & Policy paralysis which resulted into execution delays, the deteriorating macro environment due to persistent inflation (over 9% for last 11 months) and rising interest rates have adversely affected bank & NBFC stocks.

Microsec is of the view that we are at the last leg of the rate hike cycle in India (keeping in mind the ground realities and negative data flows from IIP & PMI), and that banks and NBFC stocks are at the right valuation level for long term investment of 18 to 24 months time horizon.

Microsec cautions that while there may be asset quality side pressure with rising delinquencies, higher proportion of restructured assets (as % of Advances) and higher slippages till Q3’12, these are manageable risks and are mostly priced in and probably overdone.

Microsec’s Best Buy of Bank & NBFC stocks

Public Banks	CMP	52Wk High	52Wk Low	Loan to Deposit (Mar’11)*	Interest Earned to Expended	P/B TTM	P/E TTM	P/BV 3Yr Avg	Dvd Yld(%)	CAR (%) (Mar’11)	NNPA (Jun’11) (%)*	Qtrly ROA (%)
Allahabad Bank	187.65	270.90	183.00	70.99	1.50	1.11	5.98	0.74	3.20	12.75	0.60	0.28
Andhra Bank	130.00	190.15	124.35	77.52	1.53	1.06	5.46	0.96	4.23	13.23	0.45	0.36
Bank of Baroda	792.75	1050.00	778.20	74.87	1.53	1.41	7.03	1.05	2.08	13.10	0.44	0.28
Bank of India	321.10	588.00	316.35	71.30	1.38	1.06	7.69	1.29	2.18	11.57	1.27	0.15
Bank of Maha	51.05	84.95	48.25	70.13	1.56	0.80	7.36	0.85	3.92	12.59	1.15	0.17
Canara Bank	431.25	844.00	405.45	72.27	1.33	1.02	5.11	1.04	2.55	13.37	1.34	0.22
Central Bank	103.80	211.86	101.30	72.33	1.41	1.15	5.61	0.96	2.41	12.68	0.87	0.14
Corporation Bank	444.70	814.85	435.15	74.39	1.31	0.88	4.60	0.89	4.50	14.05	0.52	1.04
Dena Bank	80.85	151.00	77.20	69.82	1.41	0.74	4.21	0.78	2.72	13.14	1.08	0.24
IDBI	112 20	202 25	111 15	87 04	126 1.26	085	637	080	312	13 83	125	014
Indian Bank	211.85	316.50	197.00	71.12	1.59	1.09	5.19	1.10	3.54	13.03	0.51	0.33
IOB	119.00	176.35	116.15	77.00	1.42	0.85	6.83	0.98	4.20	13.38	1.08	0.11
Oriental Bank	316.15	545.00	280.00	68.97	1.39	0.87	6.17	0.76	3.29	13.64	1.09	0.22
Punjab & Sind Bank	82 65	149 70	81 50	71 39	130 1.30	063	350	000	242	13 34	077	009
Punjab Natl.Bank	1042.40	1395.00	971.00	77.38	1.60	1.56	7.39	1.48	2.11	12.40	0.86	0.29
St Bk of India	2174.85	3515.00	2123.00	81.03	1.67	2.07	19.92	1.74	1.38	11.60	1.61	0.13
Syndicate Bank	105.30	164.20	98.05	78.75	1.49	0.86	5.36	0.81	3.51	12.09	0.93	0.23
UCO Bank	71 70	152 35	71 35	68 19	131	083	479	084	418	13 51	215	019
Union Bank (I)	265.45	426.80	259.50	74.58	1.48	1.21	7.16	1.33	3.01	12.88	1.32	0.22
United Bank of India	82.30	152.20	81.50	68.73	1.45	0.77	5.17	0.25	2.67	13.23	1.67	0.15
Vijaya Bank	59.10	115.35	56.80	66.51	1.31	0.82	6.61	0.74	4.23	13.04	1.65	0.09