The banking sector is probably staring at additional non-performing assets (NPA's) of over Rs 40,000 crores to its books following recent classification of eight consortium accounts of Axis Bank as non-performing assets by the Reserve Bank of India.
Lately there have also been problems from the telecom space with the RComm-Aircel merger not coming through. So the question now is have the NPAs peaked off.
To discuss the above, CNBC-Tv18 spoke to Sanjiv Bhasin, Executive VP-Markets & Corporate Affairs, IIFL and Srikanth Vadlamani, VP-Financial Institutions Group, Moody's Investors Service.
Vadlamani says the question is does the Axis Bank numbers tell us that the extent of problem is much bigger than expected. However, he does not expect such high divergence for other banks and what happened with Axis Bank to happen with the peers.
According to Vadlamani the extent of recognition of NPAs has not been uniform across Banks and expects the overall problems of PSU banks to be 50 basis points higher than FY17 reporting.
Bhasin says Axis Bank has been disappointing for last many quarters and believes this is a wakeup call and yet GST disruption has not been priced in. This is all excess provisioning, which was due but not on the books and could extend in next few quarters. According to him, more disappointments could come in from others like Yes Bank and HDFC Bank, which is also now a big corporate lender.
Bhasin says right now liquidity will chase stocks that have fallen more in spite of weak earnings and weak provisioning. Moreover, with many IPOs lined-up, primary market is going to be in focus. However, as a contrarian bet, he thinks ICICI Bank
has a good risk-reward at Rs 255-260 bank and also would like to stick with State Bank of India
but wait for numbers of others to come out.