Avoid PSU banks as asset quality woes may continue to persist: Pankaj Pandey

In a chat with ET Now, Pankaj Pandey, Head of Research, ICICIdirect.com, shares his view on June quarter results by PSU banks.

ET Now: There has been a bit of surprises that PSU banks have thrown. PNB’s June quarter asset quality was much better; BoB numbers were extremely good on the bottom line front. OBC numbers almost showed a similar thing. How would you read into the numbers? Does this make a case for selectively looking at the PSU banking space or would you still avoid that pocket, completely?

Pankaj Pandey: If you look at the numbers from a banking perspective, what we have seen is that the asset quality concerns are still persisting and also some of the troubled sectors are still struggling. It does not look like there will be some respite for these sectors in the short term.

That is why we would want to still largely avoid the PSU pack. But selectively, one can look at some of the tier I names from a two- to three-year perspective.

Otherwise, we want to believe that the PSU as an entire pack would continue to struggle. In this particular quarter, for our coverage universe, we are expecting NII to be flat, and the bottom line would decline by about 30-odd per cent. The concern, as I said, still resides on the asset quality side. It does not look like that it will wipe out anytime soon. That is why again, we would remain underweight on this segment.