Before starting – It has been noticed that many people tend to have a strong negative bias for DCB Bank without any specific reason. We request all our readers to go through the article with an unbiased and open mind otherwise it would make the research process worthless.
DCB Bank Ltd is a private sector scheduled commercial bank in India. The bank was initially established in 1930s in Mumbai from a series of Co-operative bank mergers with the Ismailia Co-operative Bank Ltd and the Masalawala Co-operative Bank.
These 2 banks later merged to form Development Credit Bank after it was granted the scheduled bank license by the RBI in May 1995. The bank later went for IPO in 2006.
Finally, the bank changed its name to ‘DCB Bank’ with due regulatory approval in January 2014. As of May 2020, the bank does not have any subsidiaries. As of writing, the bank trades with a market cap. of 2000 cr. There are a total of 22 private sector banks and 12 public sector banks currently with DCB Bank being one of the smallest out of them. The bank has a total of 336 branches all across India.
First, let’s try to analyse what are the important factors that impact the banking business, how do banks create unique position for themselves in this industry etc. This will help us better understand DCB Bank’s position relative to other banks later.
One of the most important things needed for a bank to survive is manage liquidity risks and asset-liability mismatch. Banks lend depositor’s money by making an assumption that not all depositors will come at once demanding their money back. If this happens, it would make the business go bankrupt overnight as banks do not hold that much reserves with them. (ICICI Bank faced existential threat in 2008 when the depositors rushed to take out their money from the bank after listening to some rumours on social media)
The other most important thing to note is that the money they lend as loans to its customers should be returned to them in due time along with the interest. If it doesn’t, banks would have to classify them as NPAs (as per NPA classification norms) and take the loss themselves. Banks following loose lending practises and aiming for high growth ultimately end up with higher NPAs + stressed loan book.
But why are NPAs so important? This is because banks generally have a leverage of 8-10x coupled with a low ROCE of 0.5-2%. It’s the leverage that converts this small ROCE into meaningful ROE of 8-16%. If a bank reports higher NPAs it would directly reduce its PBT as well as ROCE which would also substantially reduce its ROE as well. Therefore, it would leave the bank with lower PBT margins leading to higher probability of losses and lower pricing power to offer low interest rate loans to its customers.
Therefore, the most crucial factors affecting the banking business are –
Bank’s Risk Management Policies
Management quality has been kept at the first place because both the points stated above are inter-related. It is the management of the bank that decides upon the bank’s risk management policies and lending practises. It is of upmost important for a bank’s management to follow prudent risk management and lend conservatively.
-> The other important factor that affects bank valuation is – Cost of borrowings. The most effective way for a bank to decrease its cost of borrowings is to get more money through deposits rather than external borrowings. Interest rate on deposits is much lower than interest rate on borrowings.
Raising money through deposits is not completely in the control of the banks. This depends on a variety of external factors like how secure the depositor feels their money would be in the particular bank, availability of bank branches in his area, interest rates on deposits offered etc. Borrowing through external markets is the bank’s decision and the cost of such borrowing would depend mainly upon risk – asset quality, leverage coupled with some other factors like liquidity risk in the balance sheet, level of NPAs and past track record of the bank etc.
Since banks mostly offer similar kind of products / services which cannot be distinguished from one another, it is very difficult for them to create a unique position in the industry. Due to banks having same offerings, they usually have high customer acquisition costs. Although, there are a few other ways though which banks can create economic moats –
1. FIRST MOVER ADVANTAGE (most important)
Banks usually enjoy high customer retention rate as the cost of switching is quite high for the customers because the negatives heavily outweigh the positives while switching. A person would have to go through application filling and put up a lot of time and energy to switch. Moreover, there is not much incentive to switch! Think of this, when was the last time you switched your bank? On average we might switch our primary bank accounts maybe twice (max thrice) in our lifetime.
As a result, a bank having a wider reach (like SBI, HDFC, ICICI) will have an advantage over other smaller banks with limited reach because the bigger banks would have already started tapping the potential customers in the market.
2. NETWORK EFFECT
Another important thing to note here is that once banks acquire customers, they get added to the bank’s network as they get a debit/credit card and the network gets more valuable as more and more customers start using the same network for financial transactions.
For example, if DCB Bank acquires customers more than any other bank, not only stores, brands and many other companies would like to partner up with the bank to gain access to a huge customer base but it will give the bank more leverage and negotiating power as well to provide exclusive benefits to their cardholders (for a much lower fees) which in turn not only increases the satisfaction rate of existing customers but also attract more and more new ones thus creating a strong spiral network effect of capturing the potential customers and building partnerships (like HDFC Bank’s debit / credit cards).
3. COST LEADERSHIP
Another way for a bank to build a competitive advantage is to try to target cost leadership. Banks know they do not have much pricing power over their offerings so instead of boosting interest income, most of the banks usually target ->
(i) Cost efficiencies by trying to bring total borrowing costs (deposits and external borrowings) down along with other operating costs by trying to target increase in PBT per employee or branch. (ii) Offering high interest rates on savings and term deposits in order to capture the customers first and then slowly decreasing the interest rates over the long term (Followed by Kotak Bank aggressively). Banks know that once customer gets acquired, it’s highly unlikely that the customer would leave the bank just for 1-1.5%~ higher interest rate elsewhere.
If we were to look look at DCB Bank in 2009 and then in 2020, we will find that it transformed from a high NPA, stressed bank in 2009 to a low NPA bank with quality loan book in 2020. Lets see what all changes took place for the bank in the past few years:
The bank has seen a big transformation in the past 10 years where their loan book, risk management policies and performance metrics have undergone material changes. The management went for the following strategy –
They shifted their focussed on providing retail loans with small ticket size rather than corporate loans with larger ticket size in order to achieve diversification and spread the risk.
The management restructured their loan book and moved away from areas where default / risk was highest i.e. corporates and commercial vehicles.
The management said no to unsecured lending. They tightened their lending practises and reduced the amount of unsecured loans drastically from 29% in 2009 to 3.5% in 2019.
The management deliberately reduced the % contribution of largest depositors and borrowers in their deposits and advances respectively in order to diversify the asset & liability portfolio across broader base and further spread the risk.
The bank focussed on giving loans to people strictly above the score of 700.
The management shifted focus on reducing bulk deposits and increasing retail deposits in order to improve their liquidity and risk profile on the asset side.
I. UNDERSTANDING THE BALANCE SHEET
1. Loan Book – The loan book actually transitioned over the years from being dominated by Corporate Lending in FY09 to Retail Lending (mostly self-employed in focus) in FY20.
As of March 2020, mortgages dominate DCB Bank’s advances followed by AIB (primarily done to achieve Priority Sector Lending targets). The bank grew the % contribution of Mortgages in their loan book from 8% in FY09 to 42% in FY20 and at the same time reduced dependency in Corporate lending and Commercial Vehicle lending which have historically recorded much higher defaults.
The bank focussed to grow in retail lending segment than in corporate lending. Retail lending has proved to be more profitable for banks for many reasons:
The average ticket size of retail loans is much smaller in comparison to corporate loans which spreads the risk.
Risk weight allotted to retail loans is much less in comparison to corporate loans. which directly leads to improvement in Capital Adequacy Ratio and leaves more money available for the bank to lend.
Corporates demand lower interest rates than those prevailing in the market due to their size of loans resulting in lower NIMs for the banks.
Through retail lending, banks are able to cross sell their other products to a large number of customers giving a boost to profitability. (DCB Bank tapping their term depositors for loan requirements)
Along with that, demand for retail loans surged after 2009-10. Actually, many Indian banks heavily started focusing on retail lending around this time. The banks became reluctant to lend to corporates due to their history of high level of defaults with large ticket size.
For DCB Bank, here’s how advances grew during the years for DCB Bank compared to others:
The biggest reason why this bank is growing at a faster pace than other banks is because of its small size where it benefitting from base effect. Consider this, at this size, even if HDFC Bank performs much better than DCB Bank in terms of higher reach and acquisition to potential customers, it would have to grow its loan book by Rs. 1,74,000 cr to mark a 20% growth rate whereas DCB Bank would have to grow its loan book by Rs. 4,800 cr. It’s far easier for DCB Bank to grow at a faster rate due to this phenomena.
2. Concentration of largest depositors / borrowers –
The above chart compares Y-o-Y concentration of largest depositors / borrowers in DCB Bank’s balance sheet and its relation with Gross NPAs.
The bank saw a drastic decrease in % advances to 20 largest borrowers from around 22% in FY10 to 6% in FY19 (A similar move was seen for depositors). Consequently, the GNPAs saw a fall from around 9%~ in FY10 to 2%~ in FY19. Also notice the fall in % of unsecured loans in their loan book from 21% in FY10 to 4% in FY20. Spreading the risk among a broader base and in different geographies helped bank attain diversification benefits while lending.
In terms of risk diversification, a similar strategy was followed on the liability side as well when the management started decreasing bulk deposits and encouraged smaller ticket size retail deposits in their Total deposits portfolio.
Mr. Murali Natrajan, FY20 Q4 Earnings Call –
I would rather pay slightly more to a smaller ticket deposit than be at the mercy of some bulk deposits whose price and quantity is completely unpredictable.
Having a borrower with higher exposure is more likely to pose a threat of default than if the same amount is spread between multiple people. Lets take a closer look at Gross NPAs and compare it that with HDFC Bank and ICICI Bank:
3. Gross NPAs –
More than Net NPA, we think that Gross NPA should be given more attention to as it is this unadjusted number which reflects the true quality of the loan book. The impact of Net NPA gets covered while analysing PCR and also reflects in PBT margins anyway.
DCB Bank’s gross NPA stood at 2.46% in FY2020 (1.16% Net NPA) as compared to HDFC Bank’s 1.26% and ICICI Bank’s 5.53% Gross NPA. DCB Bank has seen sharp fall in NPAs over the past few years majorly due to the following reasons:
The NPA problem created in 2008 crisis started settling in
Along with decreasing NPA, the bank maintained a provision coverage ratio of more than 70% at all times in order to lower the unexposed part of bad debts
The management started following aggressive risk management strategies as highlighted earlier to take control of the conditions early in 2009 and maintained the lending quality when they reached their target NPA (GNPA < 2%) in 2014.
4. Changing Balance Sheet Structure –
The bank has been seen utilising its funds more into ‘lending’ over the past few years as advances as a % of total assets have increased from 56% in FY10 to 66% in FY20 and at the same time decreased investments as a % of total assets from 32% to 22%. What this would do is, improve NIMs for the bank as return on advances are significantly higher than return on investments.
But if the bank is blocking more and more of its money into lending, eventually it would lead to liquidity stress in the balance sheet, right? Thats where Loans / Deposit Ratio comes into play.
5. Loans / Deposit Ratio –
In simple words, LDR ratio is a liquidity test for banks which tells us how much of deposits money is already used in lending (advances). If the ratio is too high, it means that the bank may not have enough liquidity to cover any unforeseen fund requirements. Conversely, if the ratio is too low, the bank may not be earning as much as it could be. Investors monitor the LDR of banks to make sure there’s adequate liquidity to cover loans in the event of an economic downturn resulting in loan defaults.
Typically, the ideal loan-to-deposit ratio is 80% to 90%. A ratio higher than 100% signifies stress and tells that bank has lent every rupee deposited in the bank. It becomes even more dangerous if the bank has a history of high NPAs. Such cases require more digging whether banks hold reserves or money through (strictly long term) borrowing in order to meet future contingencies (case with ICICI Bank)
DCB Bank’s LDR stands at 82.88% for FY19, significantly lower than that of HDFC Bank and ICICI Bank. It is still on the lower side and reflects the management’s risk averse attitude.
6. Contingent Liabilities –
A contingent liability is a potential liability that may occur in the future. Banks usually have one of the highest contingent liabilities among other sectors. Any company that is engaged in forex transactions, undertaking guarantees etc are bound to have contingent liabilities.
Contingent liabilities related to banks include both explicit guarantees, such as deposit insurance programs, and implicit guarantees, such as guarantees on bank debt that may be provided during a banking crisis.
These are indicative of off balance sheet risk present in the company. DCB Bank has one of the lowest CL in the banking industry mainly because the company operates majorly in India
(local currency) and caters to the retail banking which does not require much guarantees. This bank can be termed as secure for off balance sheet risks.
However, ICICI Bank has CL at 210.18% of its total assets which is alarmingly high. If any kind of CL with big amount materialises, it can wipe out a significant portion of the bank equity.
II. UNDERSTANDING THE P&L
Lets take a look at other financial metrics from the profit and loss statement side which mainly affect business valuations:
1. NIM Margins –
NOTE: These numbers are not picked up from the company reports but are calculated after making some minor adjustments, therefore, they may not match with the reported ones.
Although DCB Bank has seen improvement in NIMs on an absolute basis (3.03% in FY10 to 3.97% in FY20), it still lags behind HDFC Bank which enjoys lower cost of funds due to higher CASA ratio as well as lower cost of borrowing from external sources. ICICI Bank has the lowest NIM out of the three because even as cost of funds (below) is lowest for the bank, much higher NPAs requiring provisioning dent their profitability.
2. Cost of Funds + CASA Ratio –
If we were to take a look at CASA Ratio for DCB Bank, its actually worsened from FY10, only to stabilise in FY14 around 24%~, significantly lower than other banks. CASA funds are a sources of cheap funds for banks which improve bank profitability. A lower CASA ratio would mean that the bank would have to go for higher cost funds in the form of either term deposits or borrowing from external sources.
For FY19, CASA Ratio for DCB Bank stood at 23.95% which is one of the lowest in the whole banking industry. It certainly demands further investigation!
The reason is – although total deposits for DCB are not at all deteriorating, they have been growing at a healthy rate of 23% CAGR over the past 10 years. Customers of DCB Bank are preferring term deposits over CASA, thus the % of term deposits in total deposits has increased from 64% in FY10 to 76% in FY20. This is because of the bank’s strategy to build a more stable funding base for long term by offering a higher interest rate on term deposits than other banks.
Mr. Murali Natrajan, FY20 Q4 Earnings Call –
Our stated strategy was to continuously work on reducing bulk deposit and replacing with retail deposits. If I have to attract retail deposits, then I have to give it a little bit of increased rate so that the marketing efforts that we do helps us to get those deposits.
Term deposits have their own set of advantages like they are less prone to run and prove to be more sticky than CASA (especially during times of crisis) but these term deposits come at a higher cost to banks. Therefore, from risk perspective, it is good that the management has a retail term deposit heavy base but is bad from valuation perspective in the sense that it hurts the net interest margins. On average, DCB Bank pays 7% on term deposits whereas most of the other banks pay 6% on the same.
3. PBT, ROE and ROA Margins
The clear out-performer in these metrics is HDFC Bank, followed by DCB Bank and finally ICICI bank.
DCB Bank lags HDFC Bank because the latter has better CASA Ratio i.e. low cost funds as well as better operational efficiency due to much more branches across India. For the same reason of high NPA provisioning required, ICICI Bank lags behind. Leverage is more or less the same between 8-10x for all three.
Soon after the situation got under control for DCB Bank in 2014, the management laid out aggressive plans for growth. In 2015, the company CEO announced expansion of the bank branches from having 160 in 2015 to targeting 320 branches being built in one year across India. The problem arised when the company shareholders, investors and analysts protested against the move saying it would dip in the ROA and ROE in the short term. Consequently, the CEO announced to target branch expansion to 320 in two years instead of one.
The main intention behind this move was to tackle the competition arising from new banks coming up during that time as well as tackle existing banks following the expansion plans rapidly thus securing the first / second mover advantage. Capturing customers faster than any other bank is more important than retaining them especially in the banking industry. This is because of the bank customers having high retention rate due to high switching costs and banks building network effect as their customer base gets larger (discussed earlier).
Now that DCB bank started aggressive expansion from 2014-15 onwards, its revenue per branch dipped since it takes time for a branch to break even and acquire customers in new areas. The effects of operational efficiency and growth are visible more clearly in the long term. Here’s how DCB Bank’s revenues and expenses per branch evolved over the years.
Although the bank interest earned grew by 23% and 26% in FY 14 and FY15 respectively, we see interest earned per branch declining due to the expansion strategy followed by the management of DCB Bank. It takes time for a branch to become fully operational and acquire enough customers to achieve breakeven atleast.
FY19 Annual report for DCB Bank, MD&A –
The branch expansion strategy which led to the opening of 150 new branches between October 2015 and October 2017, is now yielding results, with a very high proportion of the branches breaking even in less than 24 months from the start of their operations.
Here’s how the bank’s interest earned income grew over the years –
As of March 2020, the bank has laid down the expansion strategy by building 15 to 20 branches every year across India. Now that the entire focus has been shifted back again to risk management and collections due to COVID-19, we expect that the bank would not see any sizeable growth in revenues in the coming 1-2 years.
To understand this better, lets again have a look at the bank’s latest loan book structure:
The bank has currently lent majorly to mortgages (42% of loan book) and to AIB (21% of loan book). The focus is majorly towards the retail side, corporate lending being a small part of the advances.
Average ticket size of the loan stands at Rs. 35 lacs. In total, around 60% of the loan book is under moratorium (very high). Capital Adequacy Ratio stands at 17.75% as of March 2020.
Segment wise, let’s look at how the mortgages currently look like for DCB Bank:
The bank offered moratorium option to almost all of its customers as per their Q4 FY20 earnings call. Since loans are mostly focussed towards self-employed people where their businesses were not operational during the lockdown period, more than half of the customers under mortgages availed moratorium. There is a higher threat of these loans becoming NPAs over the coming months if demand fails to pick up post lockdown period.
Despite 60%~ of total loan book being under moratorium, whats comforting is that average ticket size is low which is around 18~ lacs and average LTV is also quite low (49% for Home Loans and 37% for LAP). A lot of customer equity is tied up with their loans and generally people would not like to default on that as they would lose their much valuable properties over loan repayments.
Another thing to note is that 48% of the customers are in non-Metropolitan locations which makes it all the more difficult for the bank’s collection team to collect the dues.
Talking about SME + MSMSE business, around 60% of this category availed moratorium. There has been negligible disbursement of new loans recently as the business came to a standstill during the lockdown. Important thing to note here is that around 40% of CCOD (Cash Credit and Overdraft) facility is still left with this segment which will probably be called upon in the coming months.
The bank holds limited exposure to corporates and has expressed its intention to focus more on retail in the long term. However, during the crisis as demand for corporate loans will pick up, the management has advised that they will pursue select opportunities in this area.
The area which is facing the highest stress is the CV business. By its very nature, borrowers in this category used to take loans to buy CVs, use them to make commercial trips and earn money, and pay a part of that money to banks as EMIs. Lockdown had a severe impact on this segment due to obvious reasons.
The bank has reported business as usual in this segment. There is no adverse affect to be seen in this area and the management has said in its Q4 FY20 earnings call that the bank would be trying to focus more on this area for now.
STRATEGY DURING THE CRISIS
Similar to other banks, the focus has completely shifted towards risk management and collection of dues. With minimal demand for (safe) loans on the retail side, the management has intended that it will try to earn more through fee income via transaction charges, processing fee, ATM charges (upto a limit) and along with that, maintain a tight control over costs like variable employee compensation, legal and travelling charges etc.
If we were to analyse the impact of COVID-19 on the bank or try to forecast whats going to happen with DCB Bank in the next 1-2 years, honestly we would say that we can’t do that. Anything that we think will happen is just an assumption that can turn out to be brutally wrong. Forget about profit growth for the next 1 year, our entire focus is on DCB Bank surviving through the crisis. Having 60 odd percent of bank’s loan book under moratorium, which is very high, it’s unclear how many people would be able to pay up after the moratorium is over.
As the bank serves mostly to the self employed segment, it depends upon whether the economy is able to revive demand in the coming few months or not. If the demand fails to revive, MSME and SME sector (along with others) would face existential threats and this would in turn make the self employed borrowers for DCB Bank default on their payments.
In general, with India still being a developing country (and low borrowings as a % GDP ratio), banking industry has a long way to go. The economy cannot function without banks and vica-versa. These banks have a major role to play in providing liquidity and support the growing credit needs of the economy. That being said, banks have ample room to continue their high growth trajectory for the next 10-15 years atleast. As our Indian economy matures, the cost of funds will eventually come down as number of available excellent opportunities start diminishing and people lower their return expectations.
Talking about NIM for banks, they should more or less mirror patterns of developed countries like US i.e. decrease with a very slow rate. Average NIM in FY2000 being 3.76% compared to 3.31% in FY19 for US. In India, in the coming few years where big banks become bigger and more powerful, we will not be surprised if DCB Bank gets acquired / merged along the way. Summarising the analysis for DCB Bank and putting it all together –
Positives – In absolute terms, DCB Bank is a well run bank with excellent performance metrics and controlled risks. The bank has been successful in turning around its financial health over the years by tightly controlling risks and conservatively lending. Now, it stands almost at par with the top quality banks of India like HDFC Bank and Kotak Bank in terms of low NPAs, quality loan book, diversified loan book, high NIMs etc.
It outperforms the big banks in terms of concentration of depositors and lenders, lowest unsecured lending in balance sheet, lowest contingent liabilities etc. The bank is even able to grow at a very healthy pace of 22-25% due to its positioning and small size.
Negatives – DCB bank, to be honest cannot compete with the big banks of India like HDFC / Kotak Bank in terms of cost of funds or reach. These banks are much heavily spread all across India and have been very active in capturing the market. The big banks have large customer base and are capable of providing much more benefits / exclusive deals to their customers which DCB Bank is not in a position to. Cost of funds for these banks is unmatched as general public prefers to place their money in banks they trust (brand names like ICICI, HDFC Bank).
As India progresses to become a developed economy, the banking industry is expected to see consolidation where 2-3 major players will dominate the market and smaller banks will eventually get acquired or not in a position to compete with other big banks.
Positives – The bank’s management has proved to be very competent who know what they are doing. This is very well reflected in the bank’s financial performance over the years. Company’s CEO, Murali M. Natrajan (as per the way he talks about bank’s problems, strategies and future planning, providing disclosures more than peers) is an honest and capable person with a good intent towards the bank. He seems to care what he does and what he wants the bank to be.
The bank is also not involved in fudging the numbers. According to the RBI NPA Divergence report, there was no divergence found in NPAs calculated by RBI vs DCB Bank. From what we understood, the management doesn’t want DCB Bank to grow to be the biggest bank of India or even remotely like that. Instead they want their bank to be a well managed & well run bank.
Negatives – One concern here is the key person risk. Honestly, it is a one-man show right now. DCB Bank’s CEO, Murali Natrajan has been behind the successful transformation of the business. Mr. Murali joined as CEO of the bank in 2009. Departure of Mr. Murali would again make the bank unstable and hanging. Although there are no reports or speculation of Mr. Murali wanting to resign / retire, this risk is present for the bank in the long term.
The other concern is that the ability of the management to handle a crisis like situation is untested. It is one thing to improve the financial condition of the bank, and surviving a financial crisis another. Managements can be seen taking undesirable decisions during crisis in panic which can have an adverse impact in the long term. For example, during this crisis, the demand for corporate loans will prop up and this is the segment where the defaults are usually the highest. Banks excessively focussing on growth might loosen their lending standards at this time when general loan demand diminishes.
Valuation for banks have always been tricky. It has become all the more wild, more like shot in the dark with the advent of COVID-19. On 4th June, we see news channels reporting the possibility of RBI waiving interest for moratorium period meaning a plain loss of around Rs. 2 lac crore for banks. This adds fuel to the fire. One has to understand that these conditions are highly speculative and nobody knows what going to happen next in terms of interest waiver or NPAs and such outcomes will indeed heavily impact business survivability / valuations.
Let’s take the case where we don’t know how much NPAs are going to come up in the future. It would not just impact the P&L of the bank, but would also completely shift the risk exposure of the banks opening up possibilities of a liquidity crunch, unforeseen asset-liability mismatch, huge losses, long term dent to balance sheet, bank runs in case of stress and even bankruptcy (less probable though).
With this, here’s what we think should be the fair value for DCB Bank:
As of 5th June, DCB Bank is trading around Rs. 68~ (represented by blue line). The FV Method 1 is a conservative and more of a normalised way through which we value banks and financial institutions whereas the FV Method 2 is a more aggressive method.
As per these models, the fair value of DCB Bank can be calculated between Rs. 86 – 103. These numbers take into consideration 25%~ discount we applied on top of final fair value number to reflect future uncertainty in the banking industry.
The bank, as a result looks to be trading at a 30%~ discount to its fair value. Even though it looks undervalued, it’s very hard to judge if this will turn out to be a fruitful investment in the future as the impact of Covid-19 stands largely unknown. The probability of DCB Bank surviving the crisis is very much on the higher side and could very well turn out to be a great investment in the future.
This stock has been out of favour and neglected by the investing community and is currently trading at a PE of 6. It certainly is in a MUCH better position than some of the other prominent banks trading at higher valuations. It is well managed and properly positioned with some limitations as discussed. As the future holds high uncertainty for banks, we will continue to monitor this business and look to add positions if we get to buy the business at distressed prices where we feel that the risk of uncertainty is adequately covered and worth taking.
Let us know if you found the article helpful by commenting below. We would love to hear your feedback. If you are further interested in valuation, do checkout our Market Sentiment Tracker, our own index which reflects the greed / fear in the public and gives an idea whether the market is trading at a premium or a discount.