InvestorQ : Are PSU banks like BOM, UCO Bank, CBI and Punjab & Sind Bank looking attractive at current market valuations?
Moii Chavate made post

Are PSU banks like BOM, UCO Bank, CBI and Punjab & Sind Bank looking attractive at current market valuations?

Answer
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Tisha Malhotra answered.
1 week ago


Prima facie, one can argue that many of these PSU banks are quoting close to their face values, but it is with reason in most cases. Here is what you need to know.

· Out of a total of 12 PSU banks that are still around after the slew of mergers and acquisitions, 5 banks are trading close to their face value

· This is despite a frenetic rally in the Nifty and the Sensex and ironically this includes private banks and NBFCs too.

· For example, Indian Overseas Bank or IOB trades at less than Rs.10. This is the only south-based bank in the par value trading list.

· A total of four PSBs trading below par include Bank of Maharashtra, UCO Bank, Punjab & Sind Bank and Central Bank of India; all of which are from West, East and North.

· It is not just these handful of PSBs, but ironically most PSU banks are currently quoting very close to their 52-week low levels.

· The reasons for the tepid performance of PSBs include weak asset quality, tepid business environment and low credit off-take in the aftermath of COVID-19.

· Finally, there is also an issue of limited free float in most PSBs with government owning over 90% in IOB, UCO Bank, BOM and Central Bank.

The truth is that there is limited visibility in most of these PSBs and may linger at low levels unless there is a real big story building up.