What’s driving action across Banking and Financial Services space?
We have seen strong buying interest across financial cos in the past 3 weeks. This sector traditionally has high weight in the Nifty index (around 33%) and is a high beta sector. We have tried to give insight into price movement as well as key triggers for the stocks.
01.06.2020
22.06.2020
% Gains
Statement / Guidance
Bank Nifty
19959
21708
9
SC directs Center/RBI to review interest waiver matter. Next hearing is now scheduled for first week of Aug’20. The Supreme Court (SC), in a hearing on 17th Jun’20, has maintained its stance that the Government should make the benefit of the moratorium available to all. The SC stated that it does not see any merit in charging interest on accrued interest for loans, which are under the moratorium. The banks’ association along with SBI have stated that this waiver could dent the credit culture and impact the financial health of banks, and thus, any decision to waive interest should be taken on a case-to-case basis. Thus, the SC has directed the Government/RBI to review the matter and has deferred the hearing to the first week of Aug’20.
396
430
9
AXSB expects overall proportion of the moratorium book to remain in control despite extension in the moratorium period. Expect loan growth to moderate on account of the weak environment, weighed down by the COVID-19 outbreak
ICICI Bank
339
367
8
Management said the bank has lower exposure to SME segment and hence the possibility of slippages are much lower as large part of the loan book is corporate. Margins have improved significantly on the domestic side lately.
980
1029
5
HDFCB's business growth remains robust despite economic activity getting
impacted due to the COVID-19 outbreak. Corporate loan growth remains strong
and is driving overall loan growth while retail loan growth remains soft. A strong liability franchise would support margins while higher liquidity levels would enable the bank to ride the current crisis and gain market share
1735
1835
6
HDFC management stated that gradual improvement and normalization in business was seen post Unlock 1.0. Management stated that significantly lower moratorium 2.0 (although early days) has surprised them positively. Capitalization or asset quality issues with competition in the HFC space would help HDFC on both the assets and liability side
Indusind Bank
410
490
20
Indusind Bank expects credit growth to recover gradually from 2HFY21. Currently, negligible disbursements are witnessed in the commercial vehicle (CV) segment while the tractor segment is doing well. Further, there has been an improvement in the disbursement trend in the 2W portfolio
RBL Bank
130
182
40
RBK’s asset quality would continue to remain under pressure, with concerns leaning toward Retail as the COVID-19 outbreak would impact delinquency trends in the portfolios of Credit Cards/MFI and MSME. Around 33% of the loan portfolio availed moratorium; thus, we expect credit cost trends to remain elevated at 3.6% for FY21E. Higher provisions impacted earnings, but slippages moderated on a sequential basis, enabling improvement in the coverage ratio.
Bajaj Finance
2160
2840
31
Bajaj Finance is witnessing a trend of moratorium customers repaying some of their loans. The outstanding moratorium book has declined somewhat from earlier levels of INR380b. While business volumes are still low, they are expected to normalize toward the end of 3QFY21 or in 4QFY21. The management has clearly mentioned that for next 1 year the focus will be on profitability over growth
M&M Finance
145
178
23
With the gradual opening up of economy, management is seeing green shoots of recovery and growth. Pick up in tractor and used vehicle segment is encouraging. According to management, collection trends have showcased steady improvement in the first two weeks of Jun’20; this is expected to rise by the month-end (large collections due). The management has approved rights issue of Rs.35b and the company will execute the same post 1QFY21 results
Chola Finance
152
205
35
Demand recovery in FY21 is expected to be divergent, with the Tractor and smaller ticket segments being the first to recover. Month-on-month collection trends are improving at a faster pace with the partial lifting of the lockdown. The Vehicle Finance segment partially resumed operations from mid-April and is seeing significant improvement, especially in the Tier II to IV segments. Disbursements are seeing a strong pickup as the rural economy is doing well. In the VF segment, near-term growth is likely to be driven by ICV, LCV, 2W, Tractors, Small Cars, and Used CVs, among others.
