Banking Downgrade

Why this is a telling indictment of PSU Banks…

In a sudden move, the rating agency CRISIL has downgraded 8 banks over asset quality issues. Of course, the issue of asset quality was always there and what this downgrade has done is to highlight the more vulnerable among the PSU banks. The 8 banks whose debt has been downgraded include Andhra Bank, Bank of Baroda, Bank of India, Canara Bank, Central Bank, Corporation Bank, Dena Bank and IDBI Bank. In these cases, it is not just about the quantum of NPAs but the concern is also about the slippages in NPAs. Additionally, the pressure on earnings is also likely to remain high and interest spreads are likely to compress further. Continue reading

PSU Banks

What exactly do they require from the government?

As the Union Budget approaches, the big question is what is in store for PSU banks. Obviously, this is the one sector that requires strong medicine from the government and also a helping hand. But this budget needs to go beyond incremental stuff. What is required is a complete rethink of PSU banks from a short term and long term perspective. Continue reading

Reviving PSU banks

Finally, PSU banks have reasons to smile

The package for PSU banks announced by the Finance Minister must have surely come as a breath of fresh air for the beleaguered PSBs. The package basically focuses on 4 areas viz. Capital infusion, bank board revamp, de-stressing and empowerment.

Capital infusion is simple…

The capital infusion of Rs.20,000 crore for this financial year was already announced and today was only a ratification of the same. This forms part of the Rs.70,000 crore infusion over 3 years. This base of Rs.70,000 crore will allow banks to leverage and raise another Rs.110,000 crore from the market so that the overall target of Rs.180,000 crore for bank recapitalization ahead of Basel III can be achieved. It is surely a great boost for PSU banks as they have been capital starved for too long; and this has negatively impacted their loan books. Continue reading

PSU Bank Story

Are they ripe for a re-rating in the markets?

As the results season reaches its halfway mark, there have been the standard hits and misses. Pharma has disappointed and so has capital goods. But banking and auto have not exactly fared badly. Capital goods and IT may have pockets of concern. But the moral of the story is that India is emerging as a market of very stock-specific plays. It is within this story that select PSU banks are beginning to attract renewed interest from investors. But why! Continue reading

PSU Bank story

PSU Bank story It has been all about NPAs and capital shortfalls.

Back in 2008, the performance gap between Indian public sector banks and private sector banks was not large. Over the last 6 years, the private banks have made rapid strides in terms of asset quality, banking efficiency, capital mix and balance sheet adequacy. However, PSU banks have lagged and the latest quarter underscores that this problem is only getting worse. Let me explain! Continue reading

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