Engage more with FIIs, PSBs told
The issue of sagging share valuation of PSBs came up for discussion at a recent meeting of bank chiefs with finance minister P Chidambaram, who has highlighted the need for improving investor relations.
“There is a need to have a systematic investor-bank relationship management in place in PSBs. This has become absolutely necessary as the price-earning ratio in all the PSBs is about one-fourth of what is there in the private sector banks,” an official told FE.
Except the State Bank of India, the PE ratios of most of the major banks were less than 10 last fiscal and estimated to decline in 2012-13, whereas the ratio for private banks, including ICICI Bank, HDFC Bank, Axis Bank and Yes Bank, were over 10.
Kotak Institutional Equities estimates SBI's PE ratio to slide to 9.7 in the fiscal ending March 2013, while Punjab National Bank could manage to command a PE of just 5.3, Bank of Baroda (6.4), Canara Bank (6.2), Bank of India (5.2) and Corporation Bank (4.3).
In contrast, the PE ratio of ICICI Bank is expected to stay at 15.8, while HDFC Bank will command a price multiple of 22.4, Axis Bank (11.3), Yes Bank (12.5) and IndusInd Bank (18.6).
The ministry has directed that chairmen and executive directors of state-run banks must have “regular interaction” with FIIs and foreign
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