Indian Banks Are Better Than American? Apparently (NYSE: IBN) (NYSE: PNC)

Shares of ICICI bank and other Indian banks have soared since August. In the last three months the KBW Banking index is down 10% while ICICI Bank (IBN) is up 35%. Currently IBN has a market of $32 billion this trumps PNC Financial the 6th largest bank in the United States. But are investors pricing in to much growth for these banks?

Lets make some comparisons:

GDP of India $1.16 trillion, GDP of U.S. $14 trillion
Population of India 1.1 billion, population of U.S. 307 million
GDP Per Capita of India 3,000, GDP per capita of U.S. 46,000
Current GDP growth rate of India 7.1%, GDP growth of U.S 2%

Now that we have cleared up all the numbers lets examine the differences between the two banks. PNC Financial has a market capitalization of $28 billion, ICICI Bank has a market capitalization of $32 billion.

ICICI has assets of $110 billion, PNC has assets of $260 billion
ICICI has earnings of $1.1 billion in 2009, PNC earned $2.5 billion
ICICI has a Return on Equity ROE of 10%, PNC has an ROE of 12%.

Now lets look at some figures. If India's GDP were to grow at 8% a year then India's GDP would be at $5 trillion while the U.S's with 2% growth would be at $20 trillion.

So what are investors pricing in for Indian Banks? The banks have more risk than American banks because almost all Indian Banks have contingent liabilities for derivative losses that are usually twice the companies entire balance sheet. The second reason is that ICICI bank is currently half the size of PNC Financial but gets a higher valuation. The third risk is the Indian economy, and currency fluctuations. The fourth risk is the amount the Indian economy will need to grow to be similar to that of the U.S. economy. The fifth risk is that they are currently growing at a slower rate then PNC Financial.

One can buy PNC financial, double the size of an IBN for $4 billion less dollars than ICICI Bank. Seems like quite the deal. Indian banks probably appear to be overpriced, or American banks are just very under-priced. I am more inclined to agree with the latter. But I would be hesitant to put money into Indian banks at the current time.

PNC (NYSE: PNC) and BBT (NYSE: BBT) Battling It Out

PNC and BB&T Corp are battling it out to be the top declining major bank stock of the day. PNC Financial headquartered in Pittsburgh Pennsylvania is currently down 1.55% at midday. Edwards remarked thats banks "are being valued as if financial reform will knock out 100% of revenue." Most of the banks began the day strong, except for BB&T Corp which is headquartered in Winston-Salem, North Carolina. BB&T has shown continued weakness throughout the day. The stock is currently 2.34%.

To read Edwards full report on PNC Click Here

PNC Financial Services (NYSE:PNC) Closes The Day Weak

PNC stock has been under pressure in September. PNC which was one of the top performers in the banking index today had a poor September. PNC was one of the few stocks not to increase in September. Allan Edwards CEO of The Markets Are Open noted that there is still a lot of value in this stock, and that it should outperform the banking index going forward. PNC was up 1.77% as we headed to the close.

To see Edwards full report Click Here

Bright Future Seen For PNC Despite Rocky Summer

PNC Financial (PNC) headquartered in Pittsburgh, Pennsylvania, U.S. is the 6th largest bank in the United States by total assets. PNC has outperformed the average banking index over the last two years. On September 14, PNC provided an investor presentation which highlights the company past successes and what it expects for the future.

In the presentation PNC stated that out of the major banks it has the highest net interest margin at 4.29%. Net interest margin represents the difference between banking revenues and banking expenses. It also has the second highest risk adjusted net interest margin. Andy Kibbens CEO of The Markets Are Open noted that the higher a companies net interest margin the higher chance the company will be more profitable in the long term. "See when a companies loan earn 4% interest as opposed to 3% the differences to top line growth can be so much larger." PNC has also seen its non performing drop by 700 million in Q2 as compared to Q1 which is a positive sign for the bank. However, the company is still recognizing large provisions for future losses. Kibbens noted that PNC and other major banks seem to have over provided for future losses and he expects them to release some of these provisions back into future earnings.

Kibbens estimates that PNC will have over a 10% tier 1 ratio after Q3 due to profitability from its core businesses and a gain associated with PNC Global Investment Servicing. So despite a 20% decline in its stock in the summer the company still has a bright future.

To see his full report Click Here

The PNC Financial Services Group, Inc. (PNC) is a diversified financial service company. The Company is engaged in retail banking, corporate and institutional banking, asset management, residential mortgage banking and global investment servicing, providing many of its products and services nationally and others in its primary geographic markets located in Pennsylvania, Ohio, New Jersey, Michigan, Maryland, Illinois, Indiana, Kentucky, Florida, Missouri, Virginia, Delaware, Washington, and Wisconsin. It also provides certain investment servicing internationally. Retail Banking provides deposit, lending, brokerage, trust, investment management, and cash management services to consumer and small business customers within its primary geographic markets. Asset Management Group includes personal wealth management for high net-worth and ultra high net worth clients and institutional asset management. BlackRock is an investment management firm.