Sector Update - Banking and Financial Services - ICICI Direct

The banking sector has been underperforming against the overall market (the Bank Nifty registered a fall of 5.3% whereas the Nifty fell 2.5% in the past six months) largely due to concerns over subdued credit growth, risk aversion and uncertainty on accumulated stressed assets.

The pandemic led disruptions had halted the gradual progress on credit growth and delayed a swift recovery by posing asset quality challenges. The RBI had announced various regulatory measures, which limited the asset quality pressures, to some extent.

Starting from FY22, bank credit growth has started showing signs of a gradual recovery, led by the retail segment. The corporate sector is now in a better position in terms of a revival in the capex cycle. Bank credit growth is expected to pick up as the impact of pandemic led disruptions recede, on low base effect, extension in ECLGS scheme, etc. We believe NPAs have largely bottomed out while with a further pick-up in economic activities, the trend should remain positive. Improvement in stress and other resolutions could lead to a gradual decline in credit cost.

For details, click on the link below: Link to the report

Source : Equity Bulls

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