5/8/2023 0 Comments Psu outlookDespite the decent rally, valuation still looks reasonable for PSU banks,” said the ICICI Direct report.įor context, PSU banks’ price-to-earnings ratio (PE) currently stands at 9.9, while for the overall Nifty Bank index it is 17.4 and for the broader Nifty50, it is 21.4. “Post the phase of significantly higher gross non-performing assets (GNPA), treasury mark-to-market (MTM) losses, lower capital and sub-par growth, there has been a turnaround with comfort on asset quality reversal of treasury losses, credit growth pick-up and just adequate capital position for most of them. PSU banks’ valuations still ‘reasonable’ – more juice leftĭespite the strong rally in stocks of PSU banks, a report by ICICI Direct states that the valuations of PSU banks are still “reasonable”, suggesting that there’s more juice left going forward. However, given the dominance of financial services companies, or banks, the overall performance of PSUs mirrored the peaks and troughs of the banking sector. This, coupled with several other macro disruptions, kept the PSU profit pool suppressed over FY12-20,” said a report by Motilal Oswal.Īccording to the brokerage, most of the PSU companies are in sectors that are heavily cyclical in nature – these include oil & gas, metals, and financial services. “A large part of the FY12-22 decade was spent in cleaning up the balance sheets of Financials (sector), which took its toll on the overall PSU profits as PSU banks formed one-third of the profit pool of Indian PSUs. However, the year 2022 has proved to be a boon for PSUs with PSU banks reporting an accelerated improvement in their bad loan ratios, while credit growth touched 20% in Q2 FY23, up from 3% in Q1 FY22. After a decade of underwhelming performance, public sector undertakings (PSUs) have staged a comeback in 2022, thanks largely to a robust recovery in banks – which had seen muted earnings due to the non-performing asset (NPA) crisis and a subsequent clean up.įor context, the Nifty50 index has gained 205% in the last 10 years, while the Nifty PSE index has gained only 49%.
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