BoB is trading at PE of 16, while the other PSU banks are trading at mean PE of around 5-6. So, what explains this difference. Market (read analysts of big funds) say
1. They have done full provisioning of losses
2. Legacy - have no more losses to declare
This can justify a PE premium of say 20-30% but not 100%.
But perhaps markets are ignoring a fundamental issue. Have the current processes streamlined to get bank tame future NPA's. The plain answer is NO. BoB like other PSU operate by the same standards. Hence they are bound to get the same pace of NPA's again (even if we discount the UPA/NDA interference in bank operations). T
So, there seems to be bit of mis-information, which is being sold, instead of focusing on fundamentals. Correction is bound to occur. Waiting for trigger.
1. They have done full provisioning of losses
2. Legacy - have no more losses to declare
This can justify a PE premium of say 20-30% but not 100%.
But perhaps markets are ignoring a fundamental issue. Have the current processes streamlined to get bank tame future NPA's. The plain answer is NO. BoB like other PSU operate by the same standards. Hence they are bound to get the same pace of NPA's again (even if we discount the UPA/NDA interference in bank operations). T
So, there seems to be bit of mis-information, which is being sold, instead of focusing on fundamentals. Correction is bound to occur. Waiting for trigger.
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