PSB stocks may find no taker despite cheap valuations: Dipen Sheth

In a chat with ET Now, Dipen Sheth, Head - Institutional Research, HDFC Securities, talks about the falling valuations of PSU banks.
ET Now: What do you make of the result season for the PSU banks? They started off fine, but they have just dwindled with shaky numbers from PNB, SBI and now BoI.

Dipen Sheth: The core thing that has gone wrong with PSU banks over the last few years is the deterioration in the asset quality. The dwindling asset quality must reverse in a way that makes it look sustainable.

I do not think PSU banks will become attractive for investors. They will keep on getting cheaper and cheaper.

At one point of time, we used to think that valuations (P/BV) at 1.2 or 1.3 times are cheap for a midsized PSU banks.

Later, it was 1 time and now it is 0.7 times valuations that look cheap. You might have them trading for even half the book value. I am not trying to set off some kind of panic in PSU banks. All I am saying is that the businesses need to improve.

If the ability is imparted to these banks to chase the arrant money borrowers and get that money back from them, it would be positive for PSBs. Unfortunately, the governance and the legal environment around that is not yet conducive for this to happen.

This is really one of the big levers for the Modi Sarkar to do something. The sooner they do it, the better it is going to be for PSU banks.