InvestorQ : With the new government in place, can we expect some big reforms for banks? Is it a good time to buy Punjab National Bank at current prices?
Juvina Maggie made post

With the new government in place, can we expect some big reforms for banks? Is it a good time to buy Punjab National Bank at current prices?

Answer
user profile image
Angel dcosta answered.
1 year ago


There are better choices available to you compared to PNB, in case you are looking to buy PSU banks. You must first understand that the company has reported huge losses in the March quarter on higher provisioning. In fact, PNB reported a net loss of Rs.4750 crore. Of course, the bank had reported a loss of Rs.13,400 crore in the March 18 quarter but that was more a hit on the $2 billion fraud committed by Nirav Modi. Analysts were expecting the bank to report a small profit of around Rs.260 crore in this quarter. The gross NPAs of the bank stand at 15.5% while the net NPAs are at 6.56%. The main reason for this huge loss was an additional provision of Rs.5000 crore that PNB made for its exposures to IL&FS and Jet Airways.

From an investment perspective you must still be cautious on PNB because the extent of stressed assets is still not very clear. The bank has seen healthy growth in domestic and retail advances but that is likely to be obfuscated by the amount of provisions that they have to make. During the year, the bank has also made recoveries of Rs.20,000 but that figure will saturate in the next one year. If you want to really buy a PSU banks, you can look at options like SBI and BOB where there is growth and also there is a better level of control over stressed assets. They have a better chance of growing their business traction in the future.


user profile image
K V RAO answered.
1 year ago


Avoid PSBs shares. Instead consider private sector banks shares. Here also, be selective. Consider HDFC Bank on dips. From a short term perspective, you may bet on select PSBs as budget of the new government to be presented in July may provide some sops. But in the long run, private lenders will do well in India.