A compilation by ETIG shows that, among most other stocks in the banking and financial services sector, PSBs are currently trading well above their 12-month target price based on Bloomberg consensus expectations. This the rating agency says is the bare minimum growth needed for them to generate enough cash to stay profitable. In several cases like Canara Bank Allahabad Bank and Punjab National Bank , the current prices are at a 30-50% premium to the one-year price targets.In addition, PSB stocks have turned volatile in the wake of asset quality issues. Any downside surprise in the June 2016 quarter earnings may lead to a sharp drop in their stock prices.PSBs have run much ahead of the Street's earnings expectations. In a recently released analysis, India Ratings said that limited availability of growth capital could pull down the compounded loan growth of PSBs to 9% between FY16 and FY19.

Source: Economic Times July 22, 2016 21:11 UTC