PE ratio for Banking Stocks

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Pawan Lohiya (Querist)
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05 May 2010 There is a huge difference in the Price to earnings (PE) ratio of the Banks in the Public sector and the Private Sector.
The PE of the banks like SBI, PNB, BOB Ranges from 7-9 and that of Banks like ICICI, HDFC, Axis ranges from 20-25.

What does the market consider while pricing the Private Sector Banks and is there any specific reason for such difference in the valuation?

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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05 May 2010 We all know how management differ between Government companies and Private companies.

Government companies are run with Conservative Concept and Private Companies run with Modern concept.

For example, ICICI bank open a branch within 7 days !

Recently RBI has permitted to appoint "Banking Representative" in rural areas so that huge possibilities are there for private banks to grow at much faster pace.

Where there will be a high growth possibilities in near future; the stocks will be quoted at higher PE Ratio.

Where there is no growth i.e. only Steady Returns; these shares will be quoted at low PE Ratio.

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