Besides, lot of negatives have been said on various business channels regarding the merger of five associate banks of State Bank of India: namely State Bank of Travancore, State Bank of Mysore, State Bank of Hyderabad, State Bank of Bikaner and Jaipur, and State Bank of Patiala, into itself.
However according to a report published in The Hindu: "The garment exporters and technocrats by and large feel that the absorption of the associate banks would be good for the seekers of higher volumes of loans and for those who look for quicker payments from overseas banks".
“Merger is primarily an excellent idea as sanctioning of term loans and packing credit in large volumes at the level of tier-II and tier-III type of cities/clusters like Tirupur, becomes faster.......technocrats like T. R. Ramanathan, a chartered accountant, say that consolidation would bring down administrative expenditure as so many branches were not required in this technologically advanced banking scenario".
Also, according to a report published on The Economic Times on 18 May, 2016: The State Bank of Mysore does have a lot of assets........the State Bank of Mysore for itself does have a lot of landed property particularly in Bangalore which may on revaluation be worth quite a bit...
In another significant development, according to a news report in Money Control on 17 May, 2016: India's largest lender State Bank of India is looking to sell a part of its non-core assets in National Stock Exchange (NSE). SBI along with its subsidiaries have a total of 15 percent stake in NSE. SBI Capital Markets Limited has been appointed as a consultant to the client for advising and managing the proposed disinvestment process. The last date for submission of bid is May 19. The bank expects about Rs 1,000 crore from the stake sale. It may also sell the remaining 10 percent stake in NSE during its listing, the notice said.
Not only that, according to an article on First Post on 10 May, 2016: The Veteran banker and president of the BRICS-promoted New Development Bank KV Kamath downplayed the NPA threats, saying worries about bad debts are over-blown and that higher growth will ensure that stressed assets turn productive in the short-term.
"I don't understand what the noise is about...My belief is that most NPAs will turn productive in the short run, and not in the long-term," he told reporters on the sidelines of a CII event to encourage trade and innovation ties between India and China here this evening.
Comparing the Indian scenario with China's in the early 2000s, Kamath said at USD 500 billion, non performing assets accounted for 50 per cent of the northern neighbour's GDP at that time and now, have recovered to be among the largest banks in the world.
"We are (NPA numbers) not even 10 per cent of GDP. I think we should make less noise about it," he said, adding that we should not be "freightened by the clean-up that has started".
In case of Punjab National Bank Ltd, the research house Edelweiss is bullish on the stock and has recommended buy rating on the stock with a target price of Rs.120 in its research report dated May 18, 2016.
Another news item published on 19 May, 2016, by the Business Standard, says the following:
Hence the crisis in the PSBs is not as severe, as it is made out to be by some marketmen; who come on various business channels, and parrot the same hackneyed story. Most of these poor fellows neither have any accountability nor any responsibility towards the shareholders.Banking funds have rallied 17.3 per cent over the past three months (according to category average data from Value Research), compared to the broad market index, Nifty 50, which is up 8.23 per cent. Investors keen to profit from this rally should, however, assess carefully the sector’s fundamentals.The current rally in banking, say experts, is part of the broader ‘risk-on’ rally in global markets, following the recovery in commodity prices. The second factor is fund flows. Banking constitutes 25-35 per cent of the major indices. “Whenever fund flows come in, especially from foreign exchange-traded funds (ETFs), a large part of it gets invested in banking stocks,” says V Srivatsa, fund manager, UTI Mutual Fund. Third, the sector’s underperformance before the current rally had made valuations attractive.
Therefore, I feel that instead of paying heed to what they say on Business Channels, it is better that you do your individual researches and come to appropriate conclusions. I am sure your inference will concur with that of mine.
Moreover, the government of India is contemplating to infuse around Rs.25,000 crore each into public sector banks in Fiscals, 2016 and 2017 and Rs.10,000 crore each in 2018 and 2019. However, he had also made it clear that if more money is required, the government will not shy away from its responsibility.
I would therefore, reiterate that the worst is probably over for the PSBs and the investors can take a 30 days horizon and stay put in these two Blue Chips (apart from Allahabad Bank Ltd; CMP: Rs.51.10) to get at least 20-30% returns on their CMPs]