NBFC shares hit hard post RBI move on unsecured loans
RBI) decision to raise risk weights on cash credit, personal loans, and consumer durable loans by lenders. Analysts said investors will become more selective in their stock picks within the sector as the surge in cost of capital on account of the central bank's step could squeeze lenders' margins.
Jefferies said NBFCs with a higher share of unsecured consumer loans like SBI Cards (100%), Bajaj Finance (37%) & Aditya Birla Finance (21%) should be most affected by tighter capital norms.
Large private banks will see higher impact due to higher share of unsecured loans, according to the brokerage. The impact on public sector banks will be a tad lesser than larger private banks, it said.
On Friday, SBI Cards plunged 5%, Bajaj Finance declined 1.9%, SBI slumped 3.7% and Axis Bank dropped 3.3%.
Among smaller lenders, RBL Bank shares plunged 7.8%, while IDBI Bank and IDFC First Bank shares declined around 4%.
Indian Bank, Karur Vysya, Bank of Maharashtra and Karnataka Bank shares fell nearly 3%. Nifty Bank index fell 1.3%.
While high capital levels for the NBFCs (particularly post the recent raises) should provide them a cushion, we expect margin compression (increase in funding cost) and higher asset quality stress for some of them given the reliance on fintech led originations," said IIFL Securities.
