Goldman Sachs sees more value in owning private banks than PSBs
According to Rahul Jain, Co-Head of Asia Financials and Head of India Research, Global Investment Research at Goldman Sachs, the public sector undertakings (PSUs) have done a good job in the last three to four years. “Return on assets (RoAs) improved almost 4X from 0.2-0.3% to closer to 1% and the market has rewarded those, the valuations have improved.”
Rahul Jain, Co-Head of Asia Financials and Head of India Research, Global Investment Research at Goldman Sachs believes private banks have done a good job in terms of market share gains.
“There was a lot of focus on whether the PSUs will be able to retain their market share or gain market share because they have all come back into the game with good capital ratios and with healthy balance sheets,” he said in an interview with CNBC-TV18.
However, the private banks continue to gain market share. “So we feel that there is more value in owning the private banks at this stage than the PSU banks,” he added.
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According to him, the public sector undertakings (PSUs) have done a good job in the last three to four years.
However, the valuation gap between the private bank and the PSU banks has narrowed a lot, he said.
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A couple of months back, Jain had downgraded the earnings in the financials sector basis three reasons: firstly, the cost of funds is likely to remain elevated. Secondly, consumer leverage which has been increasing has been raising the fears of potential non-performing assets (NPAs) coming through in the unsecured credit space, and thirdly, worries around operating expenses.
He thinks some of the private sector banks would be better positioned in the market.
Also Read | India's retail inflation eases to 12-month low of 4.75% in May
For more, watch the accompanying video
“There was a lot of focus on whether the PSUs will be able to retain their market share or gain market share because they have all come back into the game with good capital ratios and with healthy balance sheets,” he said in an interview with CNBC-TV18.
However, the private banks continue to gain market share. “So we feel that there is more value in owning the private banks at this stage than the PSU banks,” he added.
Also Read | ICRA expects government to drive capex cycle through roads, railways, and defence
According to him, the public sector undertakings (PSUs) have done a good job in the last three to four years.
“Return on assets (RoAs) improved almost 4X from 0.2-0.3% to closer to 1% and the market has rewarded those, the valuations have improved.”
However, the valuation gap between the private bank and the PSU banks has narrowed a lot, he said.
Also Read | Most Indians believe technology, AI will boost economic growth: HP study
A couple of months back, Jain had downgraded the earnings in the financials sector basis three reasons: firstly, the cost of funds is likely to remain elevated. Secondly, consumer leverage which has been increasing has been raising the fears of potential non-performing assets (NPAs) coming through in the unsecured credit space, and thirdly, worries around operating expenses.
He thinks some of the private sector banks would be better positioned in the market.
Also Read | India's retail inflation eases to 12-month low of 4.75% in May
For more, watch the accompanying video
(Edited by : Shweta Mungre)
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