To be sure, shares of many such lenders have taken a hit in the latest round of selling triggered by margin calls at brokerages. Most of the PSU banking stocks had rallied in the past few months and have taken a back seat this week following a sharp sell-off in equities.
Large PSU Banks are preferred State Bank of India, Bank of Baroda, Canara Bank Already trading at close to 1 book value. The peak valuations for these banks were booked around 1.5x around FY2012 and FY2014.
Mid-sized and smaller banks are currently trading at 0.5-0.7 times price to book and had touched a high of 1x book around 2014.
bank nifty has grown by about 28% while PSU Banks were up 74% in the last six months (as on December 21, 2022), ICICI Securities said in a report.
“After a phase of significantly higher gross non-performing assets, Treasury mark-to-market losses, low capital and sub-par growth, the turnaround has come with comfort on asset quality; Treasury deficit reversal, credit growth pick -ups and most of them have just adequate capital position,” said Kajal Gandhi analyst with ICICI Securities. “Despite the good rally, valuations are still fair for PSU banks.”
Total loans registered a growth of 20.4% year-on-year and grew by 4.8% sequentially to ₹120.4 lakh crore. However, PSU banks saw a growth of 20.1% in the September quarter from a marginal 3% growth in the June quarter.
Banking sectoral data (Oct 2022) shows that there was a growth of 20.2% in the retail segment and 13.6% in agriculture credit. Large corporate loans, which were a drag on overall banking credit growth, have started entering positive territory in the last few quarters.