A large chunk of the public sector banks have witnessed an increase in interest among the foreign institutional investors in recent quarters. The FII holdings in banks such as Bank of Baroda and SBI, among others, has risen in the past two quarters, while in banks such as Andhra Bank it has registered a decline.
Bank of Baroda leadsAnalysts attribute the rising trend in FII holdings to the positive sentiment witnessed in the economy in the past few months with the change in Government at the Centre. For the quarter ended September, Bank of Baroda had the highest FII holding at 18 per cent, followed by Punjab National Bank at 17.36 per cent. State Bank of India, the largest player, had a FII holding of 11.18 per cent.
Anuj Jain of CARE Ratings said the rising FII interest in the PSBs could reflect their belief in country’s growth story. “Their belief that the banks, at some stage, may play a role in the economic revival, although performance has not been really good in the recent quarter, could be driving the trend,” Jain added.
“The rising FII interest in the PSBs is bank-specific and is linked to the element of positivity in the economy witnessed in the past few months. It also depends on how the PSBs are positioned in terms of capital adequacy,” said Aalok Shah, Banking & Financial Services Analyst, Centrum Broking.
“Compared to a year ago, the larger concerns associated with the PSBs have largely eased now. Also, the asset quality is seen stabilising and the pace of accretion to the non-performing assets has slowed down. Further the deceleration witnessed in the return on assets has been largely arrested attracting the FII interests,” Shah said.
Though the PSBs have managed to attract the foreign investors’ interest, they are still way behind compared with their private sector counterparts. The FII holding in Axis Bank stood at 47.52 per cent during the September quarter, while it was 41.1 per cent for ICICI Bank and 33.84 per cent for HDFC Bank for the period.