Tuesday, March 31, 2015

BOI vs BOB vs PNB - Which PSB to buy?

A brief comparison of India's 2nd tier public sector banks (Bank of India, Bank of Baroda, Punjab National Bank) on parameters of total business, NPAs, restructured loans, profitability, return on equity and valuation reveals that Bank of India is trading at cheapest valuation among the lot in-spite of being largest in terms of global credit and holds promising upside potential in 2 years time-frame.

It can be seen from the table above, in-spite of having bigger business and far lesser NPA & restructured loans than PNB, Bank of India is trading at half the market value of PNB. Also based on 9m FY-15 results the BOI stock is trading at 0.48 time price to book while PNB is trading at 0.7 times book. It must be noted that PNB has better ROA and capital adequacy ratios which might be the reason for premium it's getting. 

Though PNB and BOB are analysts favorite and preferred bet, I believe as situation improves over next couple of years and NPA cycle starts turning for good, Bank of India has the potential for delivering better return in couple of years.

The stock might touch Rs.360 by March 2017 delivering over than 80% return assuming FY-17 book value for the bank at around 450 and a price to book valuation of 0.8 times.

1 comment:

  1. Long awaited analysis on PSU banks. Was waiting for it....Thanks


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