Market does not seem too worried about SBI result: Anand Tandon, Independent Analyst

In a chat with ET Now, Anand Tandon, Independent Analyst, says if and when SBI gets to actually merge with the rest of the subsidiaries, that will put another bit of a burden on the bank. Edited excerpts

ET Now: There is no doubt that operationally it is a good quarter for SBI but again the sticky point is that the asset quality and the high provisioning that they have undertaken for some of the individual accounts continue.

Anand Tandon: We are in a season where there is a clean-up and therefore they have to keep providing. Remember that much of it is actually a fallout of the previous regime where the earlier chairman had to gone out to try and rescue as it were the Indian corporate sector at a time post 2008 when there was shortage of money and I am hearing some of the same thing is happening now and SBI has to go out and lend. Until and unless you start treating banks as people who need to get their money, these kind of issues will continue to happen. That said, the market right now does not seem to be too concerned as you can see from the share price. But the overall position of the bank is obviously not improving. If and when we get to actually merge with the rest of the subsidiaries, that will put another bit of a burden on the banks as well.

ET Now: What is your view on SBI and the likes? Would you be party to the growth story whenever the clean-up does happen and the fact that valuations are attractive on some of these PSBs in particular SBI, so what is the recommendation for our viewers on the stock?

Anand Tandon: Well I think you cannot but agree with him that if the story is that corporate India is turning around, then this is the time you should be looking at buying corporate banks. The fact that people are not willing to buy it either, puts question mark on assumption that corporate India is really turning around. What you may be saying is that the valuation that we are seeing is still not real and there are more losses in which case I would also agree with him and say that it is very unlikely that when you are playing in the same field, the private sector has done any differently except that they are incentivised to not show losses. Therefore, either you have to sell the private sector banks or you have to buy the public sector banks but logic is not the strong point of the markets. Right now, the markets will continue to build in momentum which is you will continue to buy private sector and sell public sector. That would be the short term momentum game. The longer term game is that you have to look at public sector banks, maybe not at this stage which really means that you cannot be that bullish on the Indian economy as well.