In the wake of the pandemic, the global firm CLSA has cut its target price on banks due to risk on asset quality which is likely to worsen.
Even though RBI in its recent measures announced on Friday has provided incentive for extending credit by reducing reverse repo cut by 25 basis points.
For Indian banks, the target price by the global brokerage firm has been declined by any way between 20-70%. "The unprecedented disruption caused by Covid-19 and a 40-day national lockdown have put brakes on an already struggling credit environment. Our interactions with banks indicate that normalcy could be restored in two to three quarters depending on the severity of the disruption," said CLSA.
As per CLSA, the worst woes shall be from the MSME sector, also the distress shall be seen from the unsecured credit amid lay-offs and pay-cuts being announced due to Covid 19.
Also, credit off take will go do as many of the PSU banks are currently in the process of completing their merger procedure.
|Bank||Rating||Previous Target price||New Target Price|
|Bank of Baroda||Buy||125||70|
|Bank of India||-||60||30|