Bank stocks still not fully pricing in Covid-19 lockdown impact: Analysts

An analysis by HDFC Securities shows that adjusted book value (ABV) for banks could fall up to 22 per cent in the worst case scenario, while return on average assets (ROAA) could dip 25-70 bps in FY21

Despite improving loan recoveries in June 2020, analysts believe the situation for the Indian banking sector remains fluid as the economic impact of Covid-19 is far from over. While the moratorium given by the Reserve Bank of India (RBI) will optically limit gross non-performing assets (GNPAs) till the first half of financial year 2020-21 (H1FY21), asset quality deterioration is inevitable, they say.

Vishal Goyal, research analyst at global financial services firm UBS believes that corporates rated BBB or below (pre-Covid-19) or where earnings before interest, tax, depreciation, and amortisation (EBITDA) to interest cover is less or equal to 2x are at