Private banks stare at washed-out Q1; moratorium, Covid-19 provisions eyed

Extension of moratorium, ICICI Securities points out, till August would push recognition of pain points, thereby leading to benign slippages and stable headline non-performing asset (NPA) numbers

The nearly washed-out June quarter of financial year 2020-21 (Q1FY21) amid disrupted business activity due to Covid-19 outbreak, along with a seasonally weak period, is expected to polarise private banks’ earnings, analysts say.  While business growth may remain weak across the board, profitability will be impacted due to divergent provisioning.

“Larger banks with sufficient capital, strong granular liability franchises and a reasonable asset quality track record are expected to emerge stronger. However, elevated provisions are likely to persist for some lenders as they may have chosen to fortify their balance sheets,” analysts at HDFC Institutional Equities said in a results