Upside risk to moratorium numbers likely for banks, says Jefferies

The banks have given moratorium to around 30 percent of loans mostly around Small and Medium Enterprises (SME) and retail loans, but the range is wide from 5/10 percent to 60 percent. HDFC Bank has a lower share of loans in moratorium while it is higher for IndusInd Bank and Yes Bank, according to a report by Jefferies.

Banks' comfort on the quality of retail book arises from most borrowers being salaried class, especially for unsecured loans, limited job losses so far and borrowers having reasonable deposit balances.

“While banks have done an in-depth risk assessment and made pre-emptive provisions, we feel that overarching assumptions/outcomes from some could be optimistic than ours/investors. So, if their assessment plays out, then consensus estimates could see upgrades,” Jefferies said.

However, NBFCs mostly serve a different or lower-rated segment of clients and hence have seen higher moratoriums.

“Their liquidity or ALM positions seem okay for the next few months as they corrected it in 2019. A mix of funding is shifting to bank loans from bonds, but NBFCs with a higher share of capital market or promoter or structured financing may find this difficult as banks have caps on such exposures,” Jefferies said.

Among life insurers, premiums have slowed as it is mostly a push-product. But their balance sheet is secured with high-quality investment books and low risk of guarantees. Meanwhile, general insurers’ struggle under Covid-19 is further accentuated by deferment of motor- Third-party premium hikes and the moratorium on premiums, according to the brokerage.

Mutual funds have seen a contraction in profitable AUMs, equity, long-term debt and credit funds, which can drag earnings in FY21, it added.