Banks    
SECTOR | 14 Jan 2021
HDFC Securities
Despite benign expectations for 3QFY21E, we raise our FY22/23E earnings by 7% and 10% for our coverage universe, reflecting: (a) lower-than-anticipated eventual loan losses from COVID-19, (b) better-than-expected growth impulses accruing to large private sector banks, (c) reversal of the drag from unwinding of large liquidity buffers, and (d) gradual return of business volume-led pricing power. Our cumulative credit cost forecasts (FY21-23E) have eased by ~130bps for our coverage universe, reflecting this optimism. However, we remain conservative, relative to broader consensus estimates. Any incremental narrative, which suggests better-than-expected growth and asset quality outcomes, poses an upside risk to our forecasts. Our banking coverage universe is expected to clock negligible QoQ growth in NII and PPOP in 3QFY21E, on the back of sequentially flat NIMs and a gradual volume-driven rebound in opex and fee income. Against the backdrop of an in-force SC stay on marking of NPAs, we believe that investors will focus on pro-forma GNPAs, trends in collection efficiency and the likely restructuring pipeline. Incremental provisioning is likely to moderate at AXSB and ICICIBC, which have already built significant buffers; while small and mid-sized private banks are likely to continue witnessing elevated provisions.
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Axis Direct released a Sector Update report for Banks on 25 Jan, 2021.
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