A slew of reforms, concession and moratorium ups and downs marked the quarter bearing the full impact of Covid-19. Extension of moratorium will lead to stable NPA numbers, which remains unrealistic. Given lenders shifting strategy to opt-in model, time to access borrowers profile and resumption of activities will lead to a decline in borrower seeking moratorium. However, probability of slippages into NPA still remains uncertain. Hence, clarity on product wise trend in moratorium and repayment would be watched, which was earlier being avoided by most lenders amid uncertainty. For our coverage universe, we expect absolute GNPA at ~Rs. 278362 crore in Q1FY21E (Rs. 278966 crore in Q4FY20).
Continued contingent provision to keep earnings volatile
Given transmission of rate cuts announced earlier with aggressive cuts in MCLR/ base rate and deposit rates, margins are seen witnessing a marginal pressure (5-10 bps) in the quarter. Moderation in disbursements and lockdown will impact momentum of fee based income, though some respite is seen from treasury (mainly for PSBs). While delinquencies are expected to remain benign amid moratorium, continued build-up of contingent provisioning is expected to keep credit elevated, though breather is seen for some lenders. Earnings are expected to remain steady. However, volatility across lenders is anticipated based on level of provisioning.
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Banking_Q1FY21E.pdf