Midcap PSU Banks

With all the focus on RBI’s discussion paper on New Banking Licenses, we thought of comparing the performance of mid-sized PSU Banks – Banks with over 50% Government shareholding and having annual revenues in the range of Rs. 4,000-12,000 crore.

So here we have drawn a list of 12 Indian banks, comparing them on key financial parameters of net interest margin (NIM), non performing assets (NPAs), return on assets (RoA), price to earnings ratio (PE) and price-to-book value (PBV):



Going by the NIM (lending rates over the cost of deposits), a NIM of 3% is considered as the industry benchmark, in which Andhra Bank and Indian Bank score over the other mid-sized PSU banks.

Lower the NPAs, the better. During the first quarter of FY11, when most of the banks have been faced with the challenges of growing net NPAs, Indian Overseas Bank, Oriental Bank and Andhra Bank have shown significant reduction in amount of net NPAs vis-à-vis the FY10 NPAs.

A clear relation between lower NPA and higher RoAs is visible for Andhra Bank and Indian Bank. RoAs of both these banks were in 1.4% plus, way above the average of 0.98% of the 12 banks under consideration. Although Allahabad Bank and Syndicate Bank have improved their RoAs from the previous year, there is still some catching up to be done.