BFSI: Lenders Could Turn Cautious

Lenders could turn more risk-averse in unsecured segment and business loans, Emkay Global has stated in its latest report on the BFSI sector.

According to the broking firm, with the unlocking of the economy in H2FY21, growth momentum in unsecured loan products (mainly cards, Personal Loans and Business Loans) was expected to accelerate with the asset quality overhang easing out.

"However, lenders would once again turn cautious, particularly in PL and BL segments with the self-employed segment in pressure. As far as the SME business is concerned, it remains lackluster as lenders are shying away from new customers, while existing customers have already been extended the ECLGS benefit, leaving no further scope to lend to existing customers. That said, the asset quality risk in ECLGS is low as customer choice has been reasonably better by banks and as there is repayment moratorium as for now. Within the credit card space, SBI and ICICI have been able to bite into the market share of HDFC Bank as the latter's new card acquisition has been suspended by the RBI," Emkay Global Financial has stated.

The brokerage believes that the underlying credit appetite remains strong and reflects rising consumerism, and thus the impact of the pandemic-induced lockdowns could be just a pause.

"That said, we believe near-term growth momentum and asset quality improvement could be at risk, hence we recommend to stay put with quality stocks. Among banks, we prefer large banks with strong shock absorption capacity and ability to capture the market share when normalcy returns. We prefer ICICI, HDFC Bank, SBI and Axis among large banks. Within NBFCs, we prefer HDFC and Chola," the brokerage has stated.