Banking stocks have seen a sharp fall in the last few days, even as several large government banking stocks like Bank of Baroda, Canara Bank and PNB are very close to their 52-week lows. Here are a few banking stocks that you can buy after the present carnage in banking shares.
South Indian Bank
South Indian Bank had great performance for FY 2017-18. During 2017-18, advances grew by a decent 17 per cent, while net profits were up 51 per cent at Rs 114 crores. The bank has zero accounts in watch list of large corporate loans.
The bank in its future strategy has outlined a greater focus on retail lending. The bank plans to granulize loan portfolio to spread out risk. It also plans to lay an emphasis on banking services for SME, Retail and NRI.
A sustained focus on CASA and reducing non performing assets will remain a part of the future strategy for the bank.
South Indian Bank is one bank that continues to be undervalued and is available at a p/e of only 10 times one year forward earnings. This makes the bank a good pick at the current levels.
This bank did not have great financial performance for the quarter ending March 31, 2018. However, this is one stock that continues to trade below book value, and can give you a decent dividend yield as well.
Karnataka Bank showed only a marginal deterioration in asset quality, as the net NPAs rose from 2.85 in the quarter ending Dec 31, 2017 to 2.96 for the quarter ending March 31, 2018.
When compared to most peers, this number is acceptable, given the huge deterioration in asset quality even of some larger private sector banks like Axis Bank and ICICI Bank.
The bank continues on its expansion drive and recently opened its 806 th branch. The stock is available with a dividend of Rs 3 per share. It is possible that Karnataka Bank can report an EPS of Rs 15 for 2018-19, which means the stock is available around 7 times one year forward earnings. Buy the shares with a long term perspective in mind.
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 247 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 that 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.
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 can an EPS of Rs 8 for 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.
Karur Vysya Bank
Karur Vysya Bank has the distinction of paying 100 per cent and above dividend for the last 14 years.
Recently, the bank declared a bonus issue of shares in the ration of 1:10. For the quarter ending March 31, 2018, the bank saw a marginal deterioration in asset quality.
The stock has fallen from levels of Rs 140 to Rs 102, which now reflects the slightly weak performance for the quarter ending March 31, 2018.
However, going ahead we believe that the bank's strategy to reduce NPAs and expand its retail business should augur well. Buy the stock for gains, as the same is available on a cum bonus basis.
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.