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India Equity Research Reports, IPO and Stock News
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Underperformance of public sector banks resumed in Aug11 after a
brief respite in Jul11. Aug11 saw the weakness extend to ICICIBC and
AXSB; together, they contributed half the fall in the Bankex. Data from
the Jun11 quarter points to FIIs cutting their stake in PSBs and raising it
in new banks. The past two months saw forecasts for FY12 earnings of
PSBs being cut by 6% to 22%. Our analysis suggests there is risk of
more cuts ahead. Another weakness of PSBs is the waning asset
quality and the widening gap to the new banks. Avendus preferred
stocks are BOB, PNB, ANDB and INBK among PSBs and HDFCB and
AXSB among new banks.
AXSB, ICICIBC and SBIN pulled down the Bankex in Aug11
The underperformance of the Bankex to the Sensex in Aug11 was largely driven
by AXSB, ICICIBC and SBIN. With the weight of c51% in the Bankex, ICICIBC,
AXSB and SBIN contributed c72% of the fall. Year‐to‐date, ICICIBC and SBIN,
with a combined weight of c43%, contributed c70% to the fall in the Bankex.
HDFCB stays the best performing stock in the Bankex. In the CNXPSBK, SBIN,
and BOI, with an index weight of c51%, contributed c55% of the fall in Aug11.
Year‐to‐date, BOB remains an outperformer.
FII stake shifted from PSBs to new banks in the Jun11 quarter
The FII stake in Financials increased by 0.2% in the Jun11 quarter due to a rise
in stake in new and old private banks. Their stake shifted from PSBs to new
banks as FII stake in PSBs declined by 0.7% to 4.8% at end Jun11, while it
increased by 0.8% for new banks.
Discount of PSBs to new banks expand as earnings downgrades loom
The discount in the P/B of PSBs, relative to new banks, expanded by 1.9% in
Aug11 to 45.1%, close to the 36‐month peak. Also, the premium of the Sensex
P/E to the Bankex increased by 7.4% to 24.5%, 8.4% above the 12‐month
moving average. The Premium of the Nifty P/E to the CNXPSBK increased by
16.5% in Aug11 to 113.6%. While the net profit forecast in the past 8 months
was raised by up to 9.3% for new banks, it was cut by up to 11.6% for PSBs. In
the past two months, the FY12 earnings growth forecast for PSBs was pulled
down by up to 6%. Given the risks emerging due to high rates and rising NPLs,
there is potential for a further downward revision in the net profit forecast.
PSBs stay significantly inferior to new banks in asset quality
The gap in net NPL/networth between PSBs and new banks is currently at its
widest in four years and rising, depicting the asset quality of PSBs to be inferior.
The Jun11 quarter saw a 0.6% sequential rise in net NPL/networth to 12.2% for
PSBs, while it decreased for new banks to 2.9%. Also, the outstanding gross NPL
of PSBs increased by 11% sequentially against a 1% increase for new banks.
Avendus preferred stocks based on the filters
BOB, PNB, ANDB, CRPBK and INBK among PSBs and HDFCB and AXSB among
new banks, are the stocks that combine value with quality.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Underperformance of public sector banks resumed in Aug11 after a
brief respite in Jul11. Aug11 saw the weakness extend to ICICIBC and
AXSB; together, they contributed half the fall in the Bankex. Data from
the Jun11 quarter points to FIIs cutting their stake in PSBs and raising it
in new banks. The past two months saw forecasts for FY12 earnings of
PSBs being cut by 6% to 22%. Our analysis suggests there is risk of
more cuts ahead. Another weakness of PSBs is the waning asset
quality and the widening gap to the new banks. Avendus preferred
stocks are BOB, PNB, ANDB and INBK among PSBs and HDFCB and
AXSB among new banks.
AXSB, ICICIBC and SBIN pulled down the Bankex in Aug11
The underperformance of the Bankex to the Sensex in Aug11 was largely driven
by AXSB, ICICIBC and SBIN. With the weight of c51% in the Bankex, ICICIBC,
AXSB and SBIN contributed c72% of the fall. Year‐to‐date, ICICIBC and SBIN,
with a combined weight of c43%, contributed c70% to the fall in the Bankex.
HDFCB stays the best performing stock in the Bankex. In the CNXPSBK, SBIN,
and BOI, with an index weight of c51%, contributed c55% of the fall in Aug11.
Year‐to‐date, BOB remains an outperformer.
FII stake shifted from PSBs to new banks in the Jun11 quarter
The FII stake in Financials increased by 0.2% in the Jun11 quarter due to a rise
in stake in new and old private banks. Their stake shifted from PSBs to new
banks as FII stake in PSBs declined by 0.7% to 4.8% at end Jun11, while it
increased by 0.8% for new banks.
Discount of PSBs to new banks expand as earnings downgrades loom
The discount in the P/B of PSBs, relative to new banks, expanded by 1.9% in
Aug11 to 45.1%, close to the 36‐month peak. Also, the premium of the Sensex
P/E to the Bankex increased by 7.4% to 24.5%, 8.4% above the 12‐month
moving average. The Premium of the Nifty P/E to the CNXPSBK increased by
16.5% in Aug11 to 113.6%. While the net profit forecast in the past 8 months
was raised by up to 9.3% for new banks, it was cut by up to 11.6% for PSBs. In
the past two months, the FY12 earnings growth forecast for PSBs was pulled
down by up to 6%. Given the risks emerging due to high rates and rising NPLs,
there is potential for a further downward revision in the net profit forecast.
PSBs stay significantly inferior to new banks in asset quality
The gap in net NPL/networth between PSBs and new banks is currently at its
widest in four years and rising, depicting the asset quality of PSBs to be inferior.
The Jun11 quarter saw a 0.6% sequential rise in net NPL/networth to 12.2% for
PSBs, while it decreased for new banks to 2.9%. Also, the outstanding gross NPL
of PSBs increased by 11% sequentially against a 1% increase for new banks.
Avendus preferred stocks based on the filters
BOB, PNB, ANDB, CRPBK and INBK among PSBs and HDFCB and AXSB among
new banks, are the stocks that combine value with quality.
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