Bank stocks underperformance: Fintech threat in lending overdone, says Kotak Institutional Equities

Fintech companies have been successful in the payments space, but may not be able to replicate that success in the lending space, and so may not pose as big a threat to banks as the market is worried about, said a report by Kotak Institutional Equities (KIE).

Since the outbreak of COVID-19 in February last year, the NSE Bank Index has underperformed Nifty-50 Index by 19 percent, mainly because of the common perception that traditional banks everywhere are ill-prepared in the emerging environment versus fintech companies and Big Tech (Amazon, Google, Apple, FB), the report said.

KIE feels there are two issues with this narrative in the Indian context.