Indian banks are better placed with strong balance sheet, low NPAs and higher profits: CLSA
Indian banks have established themselves in a much stronger position, as balance sheets and profits have rebounded markedly, noted CLSA (formerly known as Credit Lyonnais Securities Asia), a capital markets and investment group.
«We believe Indian banks are well placed after a rollercoaster decade. Balance sheets are the strongest they have been in over a decade, and profits have rebounded sharply (quadrupling in 10 years),» the firm added in its observation.
It further added that the return on equity (ROE) of the Indian banking sector is the highest since the financial year 2011.
Deposit growth should coincide with the acceleration of loan growth, which increased from 10 per cent to 15 per cent on average over the previous two years during FY12-22, it added.
Mentioning the favourable conditions in the sector, the firm anticipated that the private sector banks, which haven't performed well in the stock market in recent times, are expected to give better returns because of the positive business outlook.
In the past year and over the last five years, public sector banks have done much better than private sector banks, the firm observed.
However, it was also noted that in the past decade, the private sector banks have outpaced PSU banks in current account (CA) deposits by a margin and have also pared down non-deposit borrowings.
Highlighting the net non-performing loans (Net NPL), which was once a widely discussed issue, the firm noted that it has declined to decadal lows, driven by better asset quality,
