4 Best Undervalued Banking Stocks To Buy in India

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Banking stocks have seen sharp reaction following the Union Budget 2018 in which markets saw a reaction following the imposition of Long Term Capital Gains Tax. The PNB fraud has seen some banking shares fall sharply. Here are a few stocks that you can buy after the present carnage in banking shares. 

Canara Bank

This is a government of India owned banking stock and it may not be the best time to recommend government owned banking stocks. However, the shares of Canara Bank have slumped to Rs 235 from a 52-week high of Rs 463.

The one reason to recommend the shares of Canara Bank is that it has been one of the few PSU banks, which has managed to still declare dividends and results have not been really bad. In fact, for the quarter ending Dec 31, 2017, the bank did manage to bring down its NPAs.

The gross non performing assets of the bank has fallen to 10.38 for the quarter ending Dec 31, 2017 from 10.51 in the previous quarter. The net NPA also declined in line.

The bank re-capitalization and the move by the bank to reduce NPAs should augur well. Already we are seeing tha debt ridden companies like Bhushan Steel, are being taken over, which may see large number of NPAs coming down. A good stock to buy at a new 52-week low.

The bank re-capitalization also make work well for the bank. 

Check stock quote of Canara Bank here

Karnataka Bank

This bank had an exceptional performance for the quarter ending Dec 31, 2017. The bank showed an improvement in its asset quality, with gross non performing assets and net non performing assets, both showing good improvement.

The Business performance also saw dramatic improvement in compared to the previous years. The stock is a buy for several reasons. The first is that it is available at a dividend yield of near 3 per cent. The second is that it is quoting at a price to book of just 0.75 times. There is no reason why the stock of a private sector bank should get so low price to book multiples. The business turnover of the bank has now surpassed the Rs 1,00,000 crore mark. The stock is one of the cheapest banking stocks in terms of p/e. The shares are available at a p/e of just 7 times anticipated EPS of Rs 20 for 2018-19.

The stock is a good bet at the current levels for a price target of Rs 200.

Check stock quote of Karnataka bank here

South Indian Bank

This is another bank that we liked at the current levels of Rs 27. The stock has a face value of Re 1 and gives a decent dividend.

The bank reported a decline in non performing assets for the quarter ending Dec 31, 2017 to 3.41 from 3.57.

The stock is undervalued at just 11 times 2018-19 earnings. Again, this is very low for a private sector bank with a solid branch presence in South India. Another great banking pick at the current levels of Rs 24.85 Check stock quote of South Indian bank here

Karur Vysya Bank

Karur Vysya Bank has the distinction of paying 100 per cent and above dividend for the last 14 years. For the first quarter ending Dec 31, 2017, the bank did not have a very good set of numbers.

Net profit fell from Rs 75.65 crores to Rs 71.49 crores. 

The gross non performing assets which is a major concern for banks at the moment moved higher to 5.94 from 4.27 per cent. However, despite this we believe that the worst in terms of NPAs are behind.

The stock has fallen from levels of Rs 140 to Rs 100, which now reflects the poor performance for the quarter ending Dec 31, 2017. 

Check stock quote of Karur Vysya Bank here

Karur Vysya Bank: Well placed going forward

Going ahead there is unlikely to be too many worries for Karur Vysya Bank, given the fact that its loan book is well spread. Its loan book has very marginal exposure to troubled industries.

In fact, an other area worth mentioning is that the top 20 borrowers of the bank, form just 10 per cent of the loan book.

The capital adequacy at near 12 per cent is also good for further expansion. The bank reported an EPS of Rs 1.04 for the quarter ending Dec  31, 2017. Even if it does an EPS of Rs 7 for FY 2018-19, the stock remains undervalued at a p/e of just 15 times. Another important aspect that the stock is cheap at just 1.3 times price to book value.

Disclaimer

The article is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article. The author and his family do not own any shares in the above mentioned stocks.

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