BANK NPA's - OUTLOOK 2020
Rating agency ICRA predicts that fresh gross slippages will be at 5 - 5.5 percent of standard advances during 2020-21, which will increase the banks' credit provisions and will have a negative impact on their earnings. We have already seen major investment banks like HDFC, Kotak Mahindra, SBI and Axis increasing provisions by a huge margin in order to cover slippages in NPA triggered by the lockdown of Indian economy.
With an increase in stress on asset quality and profitability, state-owned banks may need Rs 45,000-82,500 crore of capital in this financial year under a weak credit growth scenario
The RBI moratorium to borrowers was extended by another three months till August 31, 2020, and we expect the asset quality stress is likely to reflect only in third and fourth quarters of 2020-21 results. Q1 FY 2021 results will even more worse for the banking and financial services sector as we expect NPA's to increase magnificently due to extension of lockdown and decline in economic activity
The credit provisions will continue to exceed the operating profits for the public sector banks (PSBs) during 2020-21, translating in a sixth consecutive year of loss, it said.
The profitability of private sector banks will also be moderate with return on equity (RoE) declining to 3.5 - 5.1 per cent during 2020-21 as against earlier expectations of improvement to 10 -12 per cent.
This will be driven by 3.5-4.3 per cent growth by state-owned banks and 7-9 per cent by private lenders, the rating agency said.
What do you think? Please email us any questions or comments.
Disclaimer: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. It is for educational purposes only.
THANK YOU .
HAPPY TRADING !!
© copyright 2020 – All rights reserved
0 Comments