Average P/E ratio of private sector banks declines

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Price earning ratio (P/E) of private banks at aggregate level showed a decline on March 19, 2008, against that of March 19, 2007 and in the case of public sector banks, P/E showed an increase but marginal during the same period.

But private banks’ price earning (P/E) ratio was higher than public sector banks on March 19, 2008. A comparison between 21 public sector banks operating in the country and 17 private banks, all profit-making, shows this.

However, a marginal decline has been witnessed in Bankex stocks also. P/E of Bankex decreased by 0.74 points to 14.16 times.This compares with 14.90 times last year.

M-Cap of Bankex during the study period gained 28.1% to Rs 3,61,056 crore from last year’s Rs 2,81,856 crore.

The aggregate market capital of 21 public sector banks have increased by 48% from Rs 1,38,945 crore on March 19, 2007 to Rs 2,05,677 crore on March 19, 2008.

Their four quarters trailing net profit has increased by 37.4% during the study period, raising the P/E ratio from 8.38 on March 19, 2007 to 9.02 on March 19, 2008. This is significant, with higher market capital growth, the public sector banks have succeeded in raising their P/E.

Private sector banks, on the other hand, has achieved a 14.2% growth in market capital on March 19, 2008, but the trailing net profit has increased by 32.9% to Rs 8,499 crore.

And the P/E ratio has marginally decreased from 22.88 on March 19, 2007 to 19.78 on March 19, 2008. Significant increase in P/E ratio was seen in the case of Indusind Bank .

The P/E ratio of Indusind Bank increased from 11.84 on March 19, 2007 to 27.18 on March 19, 2008. In ICICI Bank, the P/E decreased from 29.81 to 22.24 on March 19, 2008.