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Has market realised SBI's true value? Former SBI chairman Rajnish Kumar weighs in

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Has market realised SBI's true value? Former SBI chairman Rajnish Kumar weighs in


In conversation with CNBC-TV18, Former State Bank of India Chairman Rajnish Kumar spoke about his book, ‘The Custodian of Trust – A Banker’s Memoir’.

Former SBI chairman Rajnish Kumar has always been vocal that Dalal Street has not given India’s largest public sector lender its due on the valuation front.
“From day one when I took charge and in all quarterly earnings calls, you would recall that it was my grudge that analysts and the market is not giving true value to State Bank of India. This was the first question which I posed, I remember distinctly in my first earnings call,” Kumar told CNBC-TV18.
Prima facie, the former banker may not be off the mark.
Consider these facts: The market cap of SBI stands at Rs 4.36 lakh crore. Compared to SBI, Axis Bank’s market cap stands at Rs 2.45 lakh crore with shares quoting at Rs 800.3 apiece on NSE as of Tuesday's closing. Another private sector major Kotak Mahindra Bank's market cap stands at Rs 4.04 lakh crore with the share price at Rs 2,035.4.
The perennial question has been: Why does not the market see value in SBI compared to its private sector counterparts with even less diversified businesses?
From investors’ point of view, what works against SBI is the possibility of hidden non-performing assets (NPAs) on its books.
“Later on, in some of the conversations with leading investors, the view or the comment was that they were not sure about the SBI book, whether it still carries hidden non-performing assets... whether they have been provided for,” the former SBI chief added.
Kumar said that SBI’s prospects look bright now with investors lapping up the stock.
“With the change of the guard at SBI, people have seen that the clean-up was actual, and today, the books of the bank can be trusted and that is what now the market believes. It is in the process of giving its true value,” he said.
SBI shares settled at Rs 488.7 apiece on Tuesday, down 1.9 percent. The stock opened at Rs 500.4 and slid to as low as Rs 483.3 during the session. So far this year, the public sector lender's stock has gained 75 percent. In the past six months alone, it has given a return of more than 48 percent.
“Even today when compared to its peers, I still believe that there is a lot more value in SBI,” Kumar said.
He also spoke to CNBC-TV18 about his book, titled ‘The Custodian of Trust – A Banker’s Memoir’. The book has hit the stores, and has a bunch of all that happened behind the scenes in the rescuing of Yes Bank or the failed rescuing of Jet Airways, the demonetisation glitches, and much more.
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