Continuing with our examination of the PSU Banking space for investment picks, we now take up PUNJAB NATIONAL BANK (PNB), BANK OF BARODA (BOB), CANARA BANK which are my top picks from the PSU Banking space, of course after SBI which we have already examined in an earlier post.
At CMP Rs 979 PNB is available at its 52 wk low having seen a 52 wk high of 1400 during the year and currently trades at approx 1.5 times Book. whereas BOB at CMP 729 (incidentally also its 52 wk low) is trading at 1.36 times Book. CANARA at CMP Rs 419 (52 wk low 361 on BSE and 52 wk high 844) is trading at 1.04 times Book. (All figures TTM basis). As can be easily surmised these scrips have been beaten down drastically, particularly in the period starting from the beginning of current calender year. The last month too has seen a substantial fall for these Bank Scrips. What seems to have accentuated this fall is the perception that the hawkish stance of the RBI would continue longer than expected and the Interest Rate Cycle may not have peaked off yet. Of course the added negative sentiment of the European crisis and the exaggerated perception that the Asset quality of the PSU Banks is relatively suspect has also played its part in the sharp down spiral in the last couple of weeks.
As far as Corporate perfoemance goes, PNB and BOB have delivered good Q1 FY2011-12 numbers though CANARAs numbers have been disappointing. However the hammering these scrips have received is clearly an overreaction mainly on the part of holders who wrongly perceive the European bug to also drastically affect the Loan growth and Asset quality of these Banks. I mean when else would one be getting CANARA BANK almost at Book Value and still not be willing to buy.!!!! Having said this it is also true that there may be a little more pain in these scrips (10-15% perhaps) on account of the aforesaid sentiment. So prudent advice would be to make the first staggered buy now and then add more at lower levels.
Thus PNB / BOB / CANARA BANK are reasonable staggered buys at current levels.
At CMP Rs 979 PNB is available at its 52 wk low having seen a 52 wk high of 1400 during the year and currently trades at approx 1.5 times Book. whereas BOB at CMP 729 (incidentally also its 52 wk low) is trading at 1.36 times Book. CANARA at CMP Rs 419 (52 wk low 361 on BSE and 52 wk high 844) is trading at 1.04 times Book. (All figures TTM basis). As can be easily surmised these scrips have been beaten down drastically, particularly in the period starting from the beginning of current calender year. The last month too has seen a substantial fall for these Bank Scrips. What seems to have accentuated this fall is the perception that the hawkish stance of the RBI would continue longer than expected and the Interest Rate Cycle may not have peaked off yet. Of course the added negative sentiment of the European crisis and the exaggerated perception that the Asset quality of the PSU Banks is relatively suspect has also played its part in the sharp down spiral in the last couple of weeks.
As far as Corporate perfoemance goes, PNB and BOB have delivered good Q1 FY2011-12 numbers though CANARAs numbers have been disappointing. However the hammering these scrips have received is clearly an overreaction mainly on the part of holders who wrongly perceive the European bug to also drastically affect the Loan growth and Asset quality of these Banks. I mean when else would one be getting CANARA BANK almost at Book Value and still not be willing to buy.!!!! Having said this it is also true that there may be a little more pain in these scrips (10-15% perhaps) on account of the aforesaid sentiment. So prudent advice would be to make the first staggered buy now and then add more at lower levels.
Thus PNB / BOB / CANARA BANK are reasonable staggered buys at current levels.
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