The Nifty Bank's return has been only 17 percent year-to-date as compared to 43 percent gain made by Nifty IT and 75 percent by Nifty Metals. However, that doesn't reduce the excitement in the space or questions in the minds of investors like - are fintech valuations justified? And what about account aggregators? Will they benefit big banks or small banks? Is Google Pay likely to take away ownership of bank customers from banks? The old questions also remain like - are micro, small & medium enterprises (MSMEs) likely to bring new nonperforming assets (NPAs) to banks? BillDesk was recently valued at $4.7 billion.
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In an interview with CNBC-TV18, Ashish Gupta, head-equity research & financials-Asia Pacific at Credit Suisse India, answered all these questions.
“We are optimistic that this year, even next year, the benefit will come. This year, you did have higher provisioning in the first quarter and some of them were actually additional COVID provisions that banks built in, but we see both for the ensuing quarters of this financial year and the next financial year, credit cost will be low,” he said.
On MSME, Gupta said, “While we do expect additional MSME stress, we don't think it will mean that credit costs need to go higher, particularly because many of the banks already have a large pool of provisions against the restructured pool.”
According to him, some of the underperformance in Nifty Bank reflects fintech’s gaining prominence. “Some of the underperformance of Bank Nifty is reflective of the fact that fintechs are gaining in dominance, both in terms of allocation of capital and also how we think the profit pool of the financial sector will be a distributed ahead,” said Gupta.
For more details, watch the video