In an interview to CNBC-TV18, Jignesh Shial, Banking Analyst at IDBI Capital shares his views on the government’s announcement of the change in PSU banks’ chiefs selection process.
Below is the transcript of Jignesh Shial’s interview with Anuj Singhal and Ekta Batra on CNBC-TV18.
Ekta: First wanted to start by asking you on the PSU banks Chief selection process that was announced by the government last evening, how did you read them from an analyst point of view and would it all change your expectations in terms of key parameters from a couple of stocks say such as likes of Bank of Baroda (BoB) as well as Punjab National Bank (PNB)?
A: It is definitely a positive move that the government has gone forward with. To change our view is something that is a little premature but it is a positive movement and it is a positive move that the government has taken and more professionalism or more transparency is coming into the appointment of the Chief of these banks. In the long-term this would give a fruitful advantage to these banks.
Anuj: Both PNB and BoB have been de-rated after the numbers last quarter, do you think time has come to take a look at some of these stocks again?
A: As I said this move is positive but it won’t affect the earnings for at least next couple of quarters or even a year. The reason for this de-rating or the way stock has been actually pushed down or punished is the reason of uncertainty which is still prevailing in the market about asset quality trends of this bank. All these banks Executive Directors have guided for at least one or two quarters of stress coming in. The second issue is growth, there is no credit growth coming into the system. So till that is there I don’t think so the stock should start moving up again unless there is something very positive coming in.Ekta: What is your expectation on the bank recapitalisation come tomorrow, what are you expecting and what would you like to hear?
A: There is definitely some expectations from the ministry that there will be some capitalisation that would be funded to these banks specifically midsize PSU banks do require higher amount of capital. If government wants to churn around the credit growth, these capital adequacy norms are necessary to be filled in and that is why we expect them to fund certain banks if they want banks to start taking exposure into riskier asset classes. However, what quantum and what amount that is purely a guess at this point of time.
Ekta: Are you expecting performance based recapitalisation to be announced just going by what was announced sometime back?
A: If you see the Rail Budget also, I don’t think so government would wait for the Budget or even make Budget a specific event to announce something like this. It could be tomorrow but it is there on the cards and it can happen probably down the line in next quarter or probably next year.
Ekta: If in case there is performance based capitalisation or recapitalisation that is announced and maybe other methods say something like a DVR which is announced for banks that don’t meet efficiency ratios that easily or have to climb up to reach that would that change your view on those banks that don’t meet those efficiency ratios that are outlined by the government?
A: Definitely this would change our views but what we believe is it won’t be so easy for the banks to meet the efficiency levels. First of all the major issue these banks are facing is there is absence of top management or consistency in the top management for so long. One CMD comes, stays for one and a half years or probably two years, has certain views on the bank and then other guy comes and he changes his own view on how he wants to expand. So, first, stability has to come on the top management side and then this kind of efficiency ratio can be seen otherwise it would be difficult to measure the bank if the management itself is changing so frequently.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
