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Credit Suisse estimates 5-10% delinquency in overall consumer loan books for private banks

Credit Suisse estimates 5-10% delinquency in overall consumer loan books for private banks

Credit Suisse estimates 5-10% delinquency in overall consumer loan books for private banks
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By CNBCTV18.com Oct 23, 2020 1:34:13 PM IST (Published)

Even as the credit cost is expected to remain softer, ranging between 3-6 percent for FY21-22, the private sector banks are estimated to witness delinquency of 5 to 10 percent in overall consumer loan books, opines Credit Suisse in its report.

Even as the credit cost is expected to remain softer, ranging between 3-6 percent for FY21-22, the private sector banks are estimated to witness delinquency of 5 to 10 percent in overall consumer loan books, opines Credit Suisse in its report.

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However, the global brokerage continues to prefer HDFC Bank, Axis Bank, ICICI Bank, given their diversified loan book and attractive valuations.
Credit Suisse report picked up early indications of a wide variance in consumer loan delinquencies across the segments, with some segments such as credit cards witnessing 17 percent, two-wheelers at 21 percent and microfinance and commercial vehicles at more than 10 percent delinquency.
If other private were to witness similar delinquency trends in these segments, this would translate into delinquency of around 5-10 percent in their overall consumer loan books, as per Credit Suisse estimate.
Due to the high share in consumer book of unsecured loans for IDFC First (35 percent), credit cards for RBL Bank (34 percent) and microfinance & commercial vehicles for IndusInd Bank (48 percent), delinquency levels in their overall consumer loan books may therefore be higher than for some larger private sector banks, where it is estimated to be 5-6 percent, Credit Suisse said.
Credit Suisse forecasts aggregate credit cost over FY21/ 22E at 3-4 percent for larger private banks and 6-7 percent for smaller private banks. It said that these delinquency trends were in line with their current credit cost estimates.
The global research firm continues to prefer larger private sector banks such as HDFC Bank, Axis Bank and ICICI Bank, given lower exposure to the more impacted segments, well-diversified loan books and attractive valuations.
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