27 Public Sector Banks have written off 1.14 lakh crores of bad debts in the last 4 years. Here is the efficiency of the banking sector in the hands of the government management. It is disturbing to realize the poor condition our banks are being managed. On the other hand the private sector counterparts are doing good business. What does this mean? Very poor competency among the PSB management, next to zero responsibility in delivering results.
Couple of days back there was a question to me; SBI has come down to 200 from 320, can we buy? The reason behind this thought was that, the SBI stock had been at a higher price very recently, now it has fallen and hence it is cheap. The answer I gave was, the price was at 320 was for a reason and it is the same when it is at 200, now. It is not cheap. In a couple of days from this discussion, SBI stock price came to 160, and again there was the question, now that it is at 160 can we buy now?
What this indicates is, that people of India have developed so much confidence on this bank; it has been part and parcel of their life for generations. Little do they know that, what was in the early days is history, there was no competition, though the management did not have the competency or responsibility, they had the advantage of opportunity at their hands, they got some of the best and some that were useless too, on the whole they made money.
Now the situation is different, private banks are giving this irresponsible bank management a run for their money. All the quality assets have gone to the private players because of the quality and service they provide. Now, the left over business is crap and that is where these PSB’s are rolling their funds. Very soon all the confidence that the citizens of India have on SBI or the PSB’s on the whole will vanish into thin air.
In our portfolio, we don’t have banking exposure since 2013. It was very early for us to move away from banking investments, the reason we got out was because our system did not qualify banks for investment, and their growth was fairly lower in comparison to companies that were showing super strong growth. Hence, our investments moved to those quality assets and now, when the whole market is weak, our portfolio is even more safe as we have moved off from equity exposure to a fair extent, thus keeping the capital protected in times of turbulence.
Our portfolio is 30% in Equity and 70% in short term debt, making the capital safe when the markets are weak.