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The Right Choice

With better asset quality and profitability, old private banks fare better than their PSU peers

Ace investor Rakesh Jhunjhunwala has a penchant for spotting winners in the stock market. So when someone of his stature turns bullish on a certain sector or a stock, it is definitely worth taking a look. At a recent event held in Mumbai, when asked for his thoughts on the banking sector, Jhunjhunwala pointed out that old generation private sector banks were in a good space.

The reason: he expects a huge credit growth in FY19 and FY20 and expects these banks to fare better than PSU banks. “Old generation banks have good pre-provision operating profit,” he said. Old private banks are seeing a constant improvement in their pre-provision profits (PPOP). For example, in the past six consecutive quarters Federal Bank has seen an improvement in PPOP from Rs.325 crore to Rs.557 crore; Lakshmi Vilas Bank has been seeing an uptick over the past five quarters from Rs.125 crore to Rs.199 crore; City Union Bank has seen an improvement in nine of the past 10 qu

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