Edelweiss has recommended investors to ‘Subscribe’ to initial public offering of Punjab& Sind (PSB) that opened Monday. The government-owned bank is issuing 40 million shares in the price band of Rs 113-120 per share.
“Compared to other regional PSU banks, PSB has strong operating/profitability metrics in terms of RoA (~1.1%), ROE (~30%) and PAT/employee.
Concerns remain on bank’s ability to: (a) sustain NIMs at current levels (3%+) in rising interest rate scenario, and (b) manage asset quality as the bank shifts to CBS-based NPL recognition. We expect bank to grow its loan book at 1.4x the system growth and deliver ROA of ~1% and ROE of ~24% over FY11-12.
At the upper band of INR 120, dilution will be book value neutral; the stock is available 1.06x H1FY11E adj. book (~30% discount to peers). We find valuations attractive and recommend ‘SUBSCRIBE’,” the report said.
The issue closes Thursday.
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Source: ET
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