Banking and steel stocks are never for faint hearted. I would recommend users to understand the economics of business than relying on a marquee investor. I am not claiming not to believe Kedia. Each investor have their own requirements and risk appetite. It is advisable to rely on your conviction than borrowed conviction.
In my view, I can see most people are taking about Kedia but have not done their homework on why the banks will or will not improve?
Last but not least, it is of paramount importance to the readers to bring in concrete arguments and logic about a particular scrip than discussing about someone’s SHP.
I am making a strong claim that if the public banks are not revived there is not capex for Indian growth story. We have no other option than to regulate. With this process, private banks will be a huge beneficiary. Banks are in severe contraction phase. It will test people’s patience but those who have a long term view of 5 years can stick to their conviction.
Tip: Private banks earn through fee based services. It is only public banks which will fund infrastructure projects. In this blood bath, the good banks are also punished.
Again I am going to post some broad points based on my observations:
there is certainly a broad trend of private banks taking away market share from psu banks. This has been happening since hdfc bank is established and will continue in future. But this transfer should happen gradually. The current situation is bit scary. All the money they got through recapitalization will be going into provisions for frauds and more n more NPAs which have been so far under the garb of restructured accounts. Once recapitalization amount is done with, PSU s are back to a situation where they can not lend. The private banks can service only 35-40% of economy from current 30%. With 60% of economy deprived of lending, the economy in doldrums, which will damage Pvt banks too. So, market share shift to Pvt banks has to happen gradually. So, I believe, the current hidden NPAs are big, which is possible, then they could threaten economy, Pvt banks n psu banks.
the current asset turn over is still about 70%. So, capex pick up still going to take time to materialise until unless the economy, damaged by demand disruptiom caused by demonetization, Gst, rapidly recovers. This could happen.
the small Pvt bankers have to compete with mercurial nbfcs in retail credit growth and big banks for good rated corporate lending. That’s why bank management plays crucial role here. We will have to see in future, how ktk bank competes.
from a news report, it seems overall credit to deposit ratio has bounced back to pre demon levels of 70%+. This is a good news for banks. This is caused by moderation of deposit growth and decent growth of lending.
The hidden NPAs seem to be one major threat for now.
When an investor with credible track record disposes of his stake, it is better for the small investor to recheck his whole thesis again. In that process of rechecking the thesis, one important input would be the reason for Marquee investor’s exit.
So, i feel, there is nothing wrong in tracking the SHP & Marquee investor’s reasons for exit for right purpose.
It is heard (no evidence available though) that even Mohnish Pabrai enquired around for finding reasons for sudden fall in KRBL’s share price.
Disc: invested
I don’t have much knowledge in banking
Hi GSrikan, i heard in one of the recent interviews (alpha mougals in Bloomberg) with Mr. Kedia that he has exited ktk bank over concerns on raising NPAs. Just fyi. Dont know if fully exited. Thank you.
Is this 86 cr is in addition to what moneycontrol article listed earlier ? i remember MM had reported over 120 cr exposure by KTK or the total exposure itself is 86 cr? can anybody help to clear
In the latest interview given (the link of interview is posted in my previous post), he mentioned partial stake has been sold as he expects NPAs nay rise further and may take longer time to resolve. I believe (I don’t have much expertise in either banking or investing) the future NPA rise has been discounted in current price up to certain level. Stable NPA numbers (in absolute numbers) in the current quarter would taken in positive manner by market.
The latest disclosure regarding geetanjali is known, I believe. What might have surprised the market is it has not been identified as NPA/fraud earlier and thus “no provision” has been made for it.
The sad saga continues in Indian banking industry. But, I believe, this is an opportunity for fresh investment unless we believe there will be no growth/recession in India.
10% increase in business turnover (deposits + credit) in one quarter?? They used to do 3000 cr average per quarter. Very surprising. Can anybody throw some light on this?
Hi Saravanan, Thanks for putting up the links of interviews of Mr Mahabaleswara rao & Mr Vijay Kedia.
It seems, the efforts the management has put in since last few years of macro economic headwinds seem to be finally paying up.
The expansion of branch network, migrating the regular banking to Apps & internet banking, focusing on increasing the CASA part of the deposits, increasing focus towards advance growth have started yielding results. The current quarter (Mar 2018) might be worst quarter the Bank could see (Due to the new stringent NPA classification rules) and would slowly improve from then onwards.
This quarter’s growth is the best growth the Bank has seen in terms of both deposits and advances (advances growth was very good last quarter too which makes it even more compelling). QoQ comparision may not be ideal way to compare, but I guess, it still gives a reasonable picture in nature of change happening here.
I posted the interviews to convince Kedia followers. I would advice investors to add their homework without relying on Kedia. I might sound counterintuitive but you will have to dig deeper. The bank is undergoing a deep transition. You would notice the transformation if you look deep by dissociating yourself from just 2 ratios.
one thing that I don’t understand is that KBL NPA is at 4.2 whereas axis NPA is at 5.2 (huge divergence between its reported figure and RBI figure), yet axis trades at a P/B of 2 whereas KBL is trading barely at 1. what is the reason for this? are we missing something?
I do not know the exact reason but I am putting out my generic opinion.
The bigger private banks have diversified sources of incomes (for ex: Investment banking [Axis capital], fund management [equity & debt mutual funds]), higher CASA deposits (50% vs 29%), higher RoA (1.75% vs 0.75%), higher Net interest margins (3.7% vs 3%), higher RoE (20% vs 8%), nation wide presence vs KBL’s south concentration etc.
According to Mr Vijay Kedia’s opinion, A bank would command close to 2 P/B, when NIM is > 3%, ROA > 1, ROE > 15%, NNPA < 1%, CASA > 30% & reasonable growth % in advances & deposits.
