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MOSL: Morning India (7/July/21): 1. Financials | Preview 1QFY22 (a. Banks and Insurance: Quarter of consolidation, with an eye on earnings recovery; b. NBFCs: Restructuring to rise in the absence of a moratori

MOrning India (7/July/21):

Today’s top research theme

Financials | Banks and Insurance: Quarter of consolidation, with an eye on earnings recovery; Credit cost to stay elevated on potential second COVID wave impact

• We believe 1QFY22 to be a quarter of consolidation as the momentum in recovery gained over 4QFY21 was impacted by the second COVID wave, with the asset quality outlook deteriorating once again. Business activity was impacted over Apr-May'21, and localized lockdowns were seen across most states. As a result, systemic growth moderated to 5.8% as of 18th Jun'21 (1% decline over FY22 YTD).
• While economic activity has started to pick up since Jun'21, we expect business growth to remain modest over 1QFY22 and estimate systemic loan growth of 9%/13% for FY22E/FY23E.
• The second COVID wave, coupled with localized lockdowns, is likely to impact asset quality performances of Banks.
• We estimate slippage to remain high over 1HFY22E, especially in 1QE, resulting in an uptick in GNPL ratios.
• We estimate credit cost to remain high over 1HFY22E. Nevertheless, we estimate our Banking Coverage Universe to deliver ~6%/41% PPOP/PAT growth in 1QFY22E (on a low base).

Piping hot news

Narendra Modi government creates a new Ministry of Co-operation: Sources

Ahead of the much awaited cabinet rejig, the Narendra Modi government has set up a 'Ministry of Co-operation'. The separate ‘Ministry of Co-operation’ is to realize it's vision of ‘Sahkar se Samriddhi’, according to government sources. The Ministry will work to streamline processes for ‘Ease of doing business’ for co-operatives and enable development of Multi-State Co-operatives (MSCS).