Is the worst over for public sector banks?

Analysts expected Public Sector Banks’ (PSB) results to be dreadful during the March 2015 on account of year-end disclosures and the last quarter of RBI dispensation. Restructuring during March 2015 quarter was expected to be high as it was the last quarter of RBI dispensation on restructuring. Financial results were bad but not dreadful Stock Market Trading Tips
 
Profits crashed but there were signs of improvement in asset quality. Edelweiss, in a report on the performance of PSBs, points out that though, optically, profitability took a severe beating (down more than 50%), better-than-expected asset quality shone through. Gross non-performing loans dipped across the board, with only a few exceptions, aided by curtailed slippages and better recoveries. Also, even though restructuring was higher, it toed the expected line — last quarter of RBI dispensation.
 
Other broking houses share the same view. Krishna Kumar Karwa, managing director of Emkay Global Financial Services in an interview pointed out that some PSBs have come out with better-than-expected numbers. Karwa adds that most of these banks are being traded at roughly the valuations of mid-cap stocks and thus offer a good long term potential Financial Astrology Trading Tips
 
Does it mean that the worst is over for PSU banks?
 
Edelweiss feels that while asset quality has shown signs of stabilisation, a meaningful improvement will be gradual. Despite encouraging signs (slippages curtailed) on the asset quality front, the mixed outlook indicates only gradual improvement. Given inherent homogeneity in the PSBs, only a broad-based improvement can be the basis of an improving trend inference.
 
In the March 2015 quarter, revenue growth continued to move slowly. Lower industry credit growth and lower fee income were the main reason for slow pick-up Intraday Trading Tips
 
Going forward, the performance of state-owned banks will hinge on the performance of lumpy accounts in key stress segments like infrastructure, iron & steel, textiles — which happened to be a major source of stress in the March quarter. Improvement in non-performing loans, which might be under pressure going forward, as a large chunk will complete moratorium. A below-average monsoon could also disturb the story.
 
Despite changes in the macroeconomic picture, there is a structural improvement taking place ingovernment banks. According to Edelweiss, the foundation for an efficient PSB structure is being laid. Government and RBI reforms are focussing on improved governance structure, minimal interference, set-up of Banks’ Board Bureau, and performance driven incentives, among others. Edelweiss feels that these will potentially alter the Indian PSU banks’ landscape, spurring valuations re-rating Nifty Trading Tips
 
PSBs might also see market interest picking up as government has approved plans of 23 banks that it owns to raise money from market to meet their capital adequacy requirement. These banks will be raising funds through either a follow-on public offer or rights issue.