Banks - Sector Update - 22 Dec 21

SECTOR UPDATE
Banks
Year Ahead: Assessing Asset Quality, Growth outlook and
Digital Preparedness
22 December 2021
Jai Mundhra Suraj Das Trimukh Phene

Research Analyst Research Analyst Research Analyst
jai.mundhra@bksec.com suraj.das@bksec.com trimukh.phene@bksec.com
+91-22-4031 7106 +91-22-4031 7112 +91-22-4031 7173
Year Ahead: Assessing Asset Quality, Growth outlook
and Digital Preparedness
We are positive on Indian banking sector and see strong Risks Rewards. From CY22 perspective, we believe there are 3 key
themes for banking sector - Asset Quality, Growth and Digital disruption, which we discuss in greater details in this report.
Notwithstanding uncertainty due to third wave, we believe Asset quality Super Cycle has already ended and we are likely to
see sharp moderation in credit costs going ahead. Macro recovery post Covid-19 disruption has been swift. Capital levels are
all time high, PCR is strong while select banks carry reasonable contingent buffer as well.
Growth is the weak spot though has clearly bottomed-out. We estimate 12-13% YoY growth for FY23 vs ~6-7% now.
Disruption from Fin-tech appears limited and the approach has been collaborative. We believe SME / small-ticket size lending
is ripe for transformational change. Recent RBI report proposes new regulatory framework. NITI Aayog pitches for ‘Digital Bank’.
Maintain our preference for large banks as they are better positioned for growth, RoAs and digital front. ICICI, HDFCB and SBI
are top picks. See favourable risks rewards for Axis / IIB. Maintain Hold on KMB and CUBK. Prefer BoB within ex-SBI PSU Banks.
• Asset Quality Super Cycle, which started in FY16, has ended. Covid-19 stress also seems limited.
 GNPAs / NNPAs have continued their improving trajectory. Net slippages have surprised positively in 2QFY22,
suggesting Covid-19 stress was temporary. O/s RSA at ~2.6% of loan is manageable. Quality of RSA is reasonable while
window has closed.
 MSME stress has been largely addressed by ECLGS. Testing would start from 3QFY22.
 Formal retail has held-up well. Trend for staff costs for BSE 500 is encouraging. Banks have re-started Unsecured loans.
 Stress remains in select pockets such as MFI, CV, etc. but unlikely to spill-over. Banks have strong ~70% PCR. Contingent
provisions also healthy. Credit costs may remain benign for an extended period providing character to RoAs and ABV.
• Credit growth remains muted but has bottomed-out already. PSB’s revival should expand the pie.
 Industry (Manufacturing) growth is at 24m high and has favourable base. Banks credit to NBFCs has also bottomed-out.
 Drag from ECLGS re-payment could be nearing bottom. Credit card issuances are rising rapidly.
 AA / OCEN and digitization of payments could drive huge lending opportunities in SME / small-ticket lending.
 We see overall credit growth rising to 12-13%, w/w Private banks growing at >15% for FY23E.
• Fin-techs could transform SME and small-ticket high-volume lending and should expand the pie.
ICICI, HDFCB are top pick followed by SBI and Axis. Maintain Hold on Kotak and CUBK. Prefer BoB within non-SBI PSU.
2
Banks’ Pecking Order
Key Themes and Banks’ Pecking Order
Asset Quality: Asset Quality outcomes have been better and credit costs have already peaked. MFI slippages / credit costs to
be elevated in 2HFY22. But overall, there could be the beginning of multi-year benign credit costs cycle. ECLGS would be tested
in 3QFY22 but do not see much risks as yet.
Growth: Growth is an issue but has already bottomed out. Large banks well placed and getting aggressive on Commercial
segment and thus we see headwinds for Regional banks. We estimate overall systemic growth to rise to 12-13% YoY by FY23E.
Fin-Tech disruption: See collaborative approach vs competitive approach by Fin-techs; Big disruption if Fin-techs can get the
lending right. RBI WG has proposed strict guidelines for lending by Fin-techs. See most action in SME / small-ticket high volume
retail lending. Commerce enablement could be the new frontier. While this along with AA / OCEN should enlarge the entire SME
pie but potential headwinds for SME focused banks.
Large banks are well placed on Asset Quality, Growth, NIMs, CASA Capital and Digital preparedness.
Mid-size banks still fine-tuning select part of their businesses. SME lending could see transformation changes.
PSU banks - Asset Quality cycle turning is huge cyclical +ve for PSBs though Core PPOP is still weak at <2%.
Top Picks: ICICI, HDFCB and SBI. Kotak is key U/W. Positive Risk rewards for Axis and IIB. See strong case for HDFCB vs KMB.
3
Valuations
Target Mkt Cap RoA (% ) RoE (% ) P/ABV (x) PAT (Rs Bn)
Banks Reco. CMP US$
Price Rs bn
Bn FY22 FY23E FY24E FY22 FY23E FY24E FY22 FY23E FY24E FY22E FY23E FY24E
Private Sector Banks
HDFCB Buy 2000 1426 7,899 104.1 2.0 2.1 2.1 17.7 18.5 18.0 3.2 2.8 2.4 370.4 446.2 538.1
ICICI Buy 950 710 4,929 64.9 1.6 1.8 1.9 13.4 15.0 16.2 2.6 2.1 1.7 231.1 282.9 324.2
Axis Buy 920 674 2,069 27.2 1.5 1.7 1.6 14.3 16.0 15.6 1.8 1.5 1.3 148.4 184.8 217.2
KMB Hold 2000 1743 3,456 45.5 2.0 2.1 2.1 11.7 12.2 12.8 3.9 3.3 2.8 76.9 88.5 107.9
IndusInd Buy 1400 846 655 8.6 1.3 1.7 1.7 10.8 14.3 14.5 1.4 1.3 1.1 48.1 70.4 80.7
Yes Sell 11 13 319 4.2 (0.1) 0.5 0.6 (0.6) 4.1 5.1 1.2 1.1 0.9 (1.9) 13.9 18.6
Federal Buy 125 81 170 2.2 0.9 1.1 1.1 10.9 12.9 13.0 0.9 0.8 0.7 19.7 24.2 30.0
City Union Hold 185 135 100 1.3 1.4 1.4 1.5 11.6 12.4 12.9 1.8 1.6 1.3 7.1 8.6 10.1
DCB Buy 125 80 25 0.3 0.7 1.0 1.1 8.1 11.4 13.5 0.8 0.7 0.6 3.0 4.5 6.0
Karnataka Sell 55 61 19 0.2 0.3 0.3 0.3 4.3 3.7 4.6 0.3 0.3 0.3 2.7 2.5 3.1
Karur Vysya Buy 75 43 34 0.5 0.7 0.9 1.0 6.4 10.2 11.4 0.5 0.5 0.4 4.6 7.8 9.7
SIB Sell 7 9 18 0.2 (0.5) 0.2 0.5 (5.3) 4.3 8.8 0.5 0.5 0.4 (2.9) 2.5 4.8
Equitas SFB Buy 85 59 68 0.9 0.9 2.1 2.1 7.8 17.5 19.2 2.1 1.7 1.5 2.7 6.9 8.6
Public Sector Banks

SBI Buy 600 449 4,009 52.8 0.7 0.9 0.9 12.9 15.7 15.3 1.2 0.9 0.8 314.4 429.0 471.0
Indian Buy 200 137 171 2.3 0.6 0.8 0.8 10.9 14.1 13.9 0.6 0.5 0.4 38.0 56.4 63.0
PNB Hold 45 37 405 5.3 0.4 0.6 0.6 4.9 7.7 8.1 0.5 0.4 0.4 46.2 76.4 86.1
Bank of Baroda Buy 125 80 414 5.5 0.7 0.8 0.8 10.6 11.9 12.3 0.6 0.5 0.5 80.1 99.7 114.3
Canara Buy 230 191 346 4.6 0.4 0.7 0.7 9.3 13.0 13.2 0.7 0.6 0.5 50.5 80.1 91.4
Union Sell 42 42 288 3.8 0.5 0.5 0.5 7.9 8.6 8.8 0.6 0.5 0.5 49.2 58.7 64.7
Bank of India Buy 80 50 203 2.7 0.5 0.6 0.6 8.4 9.0 8.9 0.5 0.5 0.4 36.6 45.2 48.1
4
Stock performance
Banking stocks have underperformed in the last 1 month and 3 months.

Banks 52Week Change from 52W Change in (% )
Price Recent
Private High Low High Low 1w 1m 3m 6m 12m
high
HDFCB 1,426 1,789 1,342 -20 6 -6 -7 -9 -4 1 -16
ICICI 710 867 488 -18 45 -6 -7 -0 13 37 -16
Axis 674 881 568 -23 19 -4 -5 -15 -8 11 -20
KMB 1,743 2,253 1,626 -23 7 -7 -14 -13 -1 -11 -21
IndusInd 846 1,242 789 -32 7 -10 -16 -22 -15 -7 -31
RBL 168 274 156 -39 8 -15 -18 -4 -19 -26 -23
Yes 13 19 11 -33 21 -9 -1 -0 -7 -33 -12
Federal 81 108 58 -25 41 -12 -14 2 -3 22 -22
City Union 135 190 129 -29 5 -9 -14 -10 -18 -25 -25
DCB 80 127 79 -37 2 -8 -19 -11 -26 -33 -23
Karnataka 61 82 47 -26 29 -10 -16 -10 -3 7 -23
Karur Vysya 43 65 38 -33 12 -14 -19 -10 -16 -13 -28
SIB 9 14 7 -38 32 -7 -4 -14 -24 -3 -19
IDFCFB 46 69 33 -34 39 -11 -6 -5 -21 23 -14
Bandhan 247 425 245 -42 1 -13 -19 -12 -22 -40 -29
AUSFB 1,000 1,390 720 -28 39 -14 -18 -9 -3 11 -21
Equitas SFB 59 77 33 -23 78 -6 -7 -1 2 49 -14
Ujjivan SFB 18 45 17 -59 7 -7 -7 -10 -41 -54 -22
PSU
SBI 449 542 248 -17 81 -8 -11 3 9 65 -15
Indian 137 195 74 -30 85 -14 -14 3 -2 57 -28
PNB 37 48 31 -24 17 -9 -12 -4 -9 1 -21
Bank of Baroda 80 108 56 -26 43 -14 -17 2 -0 27 -25
Canara 191 248 105 -23 81 -12 -13 23 29 57 -22
Union 42 55 27 -23 55 -12 -10 22 11 35 -22
Bank of India 50 101 45 -51 10 -13 -16 -11 -34 -0 -24
IDBI 46 65 26 -30 73 -12 -12 23 21 12 -27
Index
Bankex 39,190 47,877 33,316 -18 18 -7 -10 -8 0 11 -17
Bank Nifty 34,440 41,830 28,977 -18 19 -7 -9 -7 -0 12 -16
Sensex 55,822 62,245 44,923 -10 24 -4 -6 -5 7 19 -10
NIFTY 50 16,614 18,604 13,131 -11 27 -4 -6 -4 6 21 -10
Source: Bloomberg, B&K Research
5
Valuations
RoAs (%) vs P/ABV (x) – FY23
Source: Company Data, B&K Research

6
Valuations
Large banks trading at attractive valuations vs their trading history
Source: B&K Research
7
Theme 1: Asset Quality: Covid-19 stress largely
01 over; Start of benign credit costs cycle
Theme 2: Loan Growth has already bottomed-

02 out; Private growth likely at >15% YoY
Theme 3: Digital transformation underway but

03 disruption appears limited; SME / Small-ticket
lending could explode
04 Banks’ Pecking Order and Top Picks
8
Asset Quality Super Cycle has ended
• Asset Quality Super Cycle, which started in FY16, has ended. Covid-19 stress also seems limited. GNPAs / NNPAs have
continued their improving trajectory. Net slippages have surprised positively in 2QFY22, suggesting Covid-19 stress was
temporary.
• O/s RSA at 2.6% of loans is much manageable. Quality of restructuring also reasonable with small share of bulky corporate
exposures and higher share of low LGD mortgage and SME loans. RSA window has already been closed.
• MSME stress has been largely addressed by ECLGS. Testing would start from 3QFY22.
• Formal retail has held-up well. Data for staff costs for BSE 500 is encouraging. Banks have re-started Unsecured loans.
Stress remains in select pockets such as MFI, CV, etc. but unlikely to spill-over.
• Banks have strong ~70% PCR on GNPAs. Contingent provisions also healthy. Hence, we see moderation in credit costs across
banks. Credit costs may remain benign for an extended period providing strong character to RoAs and Book value.
Systemic GNPAs / NNPAs have continued their improvement trjectory
Source: Company Data, B&K Research. *Data for 2QFY22 is for B&K coverage
9
Asset Quality Super Cycle has ended
2QFY22 Gross slippages down 23% QoQ; ratio down to 2.9%; Aggregate NNPAs now at ~2.2%.
Credit costs at multi-quarter low leading to healthy uptick in ROAs across banks

10
Gross / Net NPAs continue their improving trajectory
• While gross slippages were higher than estimates at Gross / Net NPAs continue improvement
select banks, Net slippages were much better for most of
the banks.
• With SREI recognition in 2QFY22, Large corporate Asset

Quality cycle, which started in 2016 seems to have ended.
Future recognition, if at all, would spill over to 4QFY22.
• Net NPAs for private banks as of 2FY22 at 1.3% is decisively

better than pre-Covid levels of 1.7% (3QFY20).
• Kotak / IIB stand-out as NNPAs are above pre-Covid.
• PSU Net NPAs are now 4.0% vs 4.7% Pre-Covid. Aggregate

NNPAs for B&K Banks are 2.2%, down ~25 bps QoQ.
Despite Covid-19 led disruptions, GNPAs / Net NPAs have declined for most of banks

11
Miniscule Net slippages suggestive of strong bounce
back
• Notwithstanding Omicron uncertainties, sharp decline in Systemic slippages decline sharply QoQ
slippages across banks suggests Covid-19 induced stress
is now behind.
• Reported slippages declined 20% QoQ. Adjusting for SREI
and inter-quarter adjustments at SBI, PSBs saw ~20% drop
QoQ.
• Overall, Net slippages came at 0.4% annualized vs 1.8%
QoQ. Net slippages for ICICI / KMB / Axis were 0.1% - 0.6%
and –ve for SBI.
• Large part of the recovery seems granular (no major
benefits from DHFL for Private) suggesting customer cash
flows have regularized.
• For the entire Covid-19 period, PSBs have seen remarkably
lower reported slippages than those at Private banks. Source: B&K Research
Sharp decline in slippages QoQ. Net of recovery, slippages as low as ~0.1% for Kotak / ICICI
Source: Company Data, B&K Research 12

MFI remains the pocket of stress
• One of the segments which saw elevated stress in 2QFY22 was Micro Finance.
• Lack of moratorium led to sharp rise in GNPAs for MFI business at Bandhan, Equitas, Ujjivan, RBL, IIB etc.
• Unlike wave 1, the restructuring was also bulky in wave 2.
• O/s RSA for MFI vertical is high at 12-14% across Bandhan, Equitas and Ujjivan.
• IIB stands out as MFI RSA is much lower at 3%. It has also provided 100% on MFI GNPAs. However, it has got into ever-greening
allegations at MFI business. We see spike in MFI slippages in IIB in 3QFY22.
• The SMA 1+2 figures have reduced QoQ though it is still above comfortable levels, in our view.
• Within peers, RBL has run the most conservative growth at MFI loans.
Sharp rise in reported stress for MFI segment. SMA 1+2, though down QoQ are still above comfort.
13
PSU Banks: Segmental Stress
PSU banks – Segmental stress

Slippages Break-up (Rs Mn) SBIN Indian BOB Canara PNB BOI Union
Retail NA 1,500 4,510 3,500 6,500 1,454 6,020
MSME NA 7,460 10,950 10,000 15,550 3,417 15,260
Agri NA 9,830 6,390 10,000 13,840 3,438 10,310
Corporate NA 20,730 36,170 45,460 54,880 4,762 35,860
Total 42,920 39,520 58,020 68,960 90,770 13,071 67,450
Slippages (Non-annualized) (% of
SBIN Indian BOB Canara PNB BOI Union
segmental loans)
Retail NA 0.2 0.3 0.3 0.5 0.2 0.5
MSME NA 1.1 1.2 0.9 1.2 0.5 1.4
Agri NA 1.2 0.6 0.6 1.0 0.6 0.8
Corporate NA 1.3 0.9 1.5 1.6 0.2 1.3
Total NA 1.0 0.8 1.0 1.3 0.3 1.1
Segment wise RSA % SBIN Indian BOB Canara PNB BOI Union
Retail 1.7 11.8 4.0 8.0 5.3 8.2 7.6
MSME 5.0 13.8 7.3 5.7 4.5 14.1 6.8
Agri - 1.4 NA 0.5 1.7 - 0.3
Corporate 0.8 1.9 2.1 0.9 1.9 3.7 2.4
Total (% of gross loans) 1.5 5.9 2.8 2.8 2.9 5.5 3.8
Total as % of net loans 1.6 6.3 3.0 3.0 3.1 6.1 4.1
Source: Company, B&K Research. Pleasenote that certain assumptions are made in calculating segmental break-up for select banks.
Gross NPA Ratio (%) - Reported SBIN Indian BOB Canara PNB BOI Union
Retail 1.0 4.3 2.8 1.4 5.2 NA 4.2
MSME 8.1 14.6 15.2 13.7 21.7 NA 20.4
Agri 14.8 11.4 9.2 5.7 17.7 NA 12.4
Corporate 7.6 8.8 6.5 10.8 12.6 NA 13.6
Overseas 0.8 12.2 9.1
Total 4.9 9.6 8.1 8.4 13.6 12.0 12.6
Source: B&K Research.
14
O/s Restructured Assets manageable
• Covid-19 restructuring has been benign vs expectations. KMB and Axis have relatively lower RSA
• Kotak and Axis have the lowest RSA at <1% across banks,
while HDFCB has highest RSA at 1.7% within large banks.
• RSA at IndusInd bank are bulky at 3.6% due to higher share

of CV and MFI.
• Among mid-small private banks, Bandhan has the

highest RSA followed by EquitasB. Within PSU banks, INBK
and BOI have higher RSA.
• We calculate that overall RSA at system level is at 2.6%,

within which PSU banks at 2.9% and 2.2% for Private.
Large banks have lower RSA at <2%, while MFI focused banks have 9-10% RSA

15
ECLGS AQ good so far though real test in 3QFY22
• GoI had increased the ECLGS scheme limit from Rs 3.0 ECLGS off-take has been slower QoQ
trillion to Rs 4.5 trillion. Despite tweak in ECLGS, the off-take
has been relatively slower across banks.
• Kotak ECLGs portfolio has been relatively stable QoQ at

5.2%, which is amongst highest across large banks.
• Select banks, such as Kotak, have commented that ECLGS

portfolio is behaving reasonably well, while CUBK saw
steady repayment in vintage ECLGS book.
• EquitasB continues to have NIL ECLGS.
• ECLGS book would be fully tested in 3QFY22 onwards.
Kotak and CUBK have relatively higher O/s ECLGS at >5%, while EquitasB has Nil

16
ECLGS AQ good so far though real test in 3QFY22
ECLGS Sectoral distribution High availed rate for medium SMEs
Source: Transunion CIBIL, B&K Research
~2% NPAs and ~10% in SMA in ECLGS
Source: Transunion CIBIL, B&K Research Source: Transunion CIBIL, B&K Research
17
ECLGS and Non-ECLGS performance
Performance of ECLGS and Non-ECLGS borrowers
Source: MSME Pulse
Risk transition matrices for ECLGS and Non-ECLGS SME
Source: MSME Pulse

18
Retail stress – No major concern
• Retail drove the maximum slippages at Private banks in Gross / Net Retail slippages under control
the last 18 months (Covid-19 phase).
• However, retail slippages have seen healthy upgrades

suggesting Covid-19 issues were temporary in nature and
more importantly, there is NO new retail slippages cycle.
• Stress persists in Unsecured / MFI / CV though Unsecured /

MFI are short duration and high yielding products.
• Formal retail job market (BSE 500 data) has been resilient
post initial hiccups in 1QFY20 during national lockdown.
• We see Retail asset quality to improve going ahead.

Source: B&K Research. *Note: SBIN figures are for overall bank.
Formal job segment remains resilient as indicated by BSE 500 staff costs trends
BSE 500 chart
Source: B&K Research. Please note that we have removed few dozen names to make the data comparable.
19
Net Stress: Large banks remain well placed
All banks – Net stress as % of NW
Source: Company Data, B&K Research. Note: ICICI and Axis figures are including o/s BB and Below portfolio
All banks – Net stress as % of loans
20
Credit costs to moderate going ahead
• Credit costs have declined sharply across banks, thanks Credit costs to moderate going ahead
to strong recovery and contained net slippages. Credit Costs (%) FY21 FY22E FY23E FY24E
• Credit costs for private banks are also lower as TWO Public Sector Banks
recovery is now part of provisioning. SBI 1.3 1.1 0.9 0.9
Bank of Baroda 2.0 1.4 1.3 1.2
• However, PSU banks are yet to change TWO recovery re- Canara 2.3 2.1 1.3 1.2
grouping and should do latest by 4QFY22, in our view. Indian 2.1 2.0 1.4 1.4
• Nonetheless, PSU bank provisioning have been favorably Bank of India 1.6 1.1 0.8 0.8
impacted by Dewan resolution in 2QFY22. PNB 3.5 1.9 1.3 1.3
Union 2.4 2.1 1.8 1.6
• We see healthy moderation in Credit Costs YoY going
ahead. Private Sector Banks
HDFCB 1.1 1.1 1.1 1.1
Credit costs have moderated sharply ICICI 2.4 1.3 1.1 1.2
Axis 2.1 1.1 0.8 0.8
KMB 0.8 1.2 0.9 0.8
IndusInd 3.5 2.9 1.7 1.7
Federal 1.3 1.1 0.8 0.9
RBL 4.0 4.7 2.1 2.0
Yes 4.9 1.3 0.7 0.7
City Union 2.0 1.9 1.5 1.5
DCB 1.7 1.7 1.1 0.8
Karnataka 2.3 2.4 1.9 1.8
Karur Vysya 1.5 1.7 1.2 1.0
SIB 2.3 3.2 1.6 1.4
Equitas SFB 3.3 3.0 1.5 1.7
Source: Company Data, B&K Research Source: B&K Research.
21
Bank-wise Asset Quality Snapshot
Bank-wise asset quality snapshot: CET1, ECLGS, Gross / Net NPAs, PCR, RSA and Slippages
Gross Slippage Net Slippages
CET-1 O/s O/s RSA
Gross NPAs (%) Net NPAs (%) PCR (%) - 1HFY22 - 1HFY22
Ratio ECLGS -%
(annualised) (annualised)
Banks
% of Change Change
(in %) 2QFY22 2QFY22 2QFY22 2QFY22 % of Loans % of Loans
loans (%) (%)
ICICIBC (Incl. BB & Below) 16.2 2.1 4.8 (0.3) 1.0 (0.2) 80 1.3 3.3 1.0
AXSB (Incl. BB & Below) 15.8 1.7 3.5 (0.3) 1.1 (0.1) 70 0.9 3.9 1.5
IIB (Incl. Vodafone) 15.4 2.1 2.8 (0.1) 0.8 (0.0) 72 3.6 4.9 1.6
Bandhan (Incl. MFI SMA 1+2) 19.4 2.5 10.8 2.6 3.0 (0.3) 74 11.2 12.4 8.1
ICICIBC 16.2 2.1 4.8 (0.3) 1.0 (0.2) 80 1.3 3.3 1.0
AXSB 15.8 1.7 3.5 (0.3) 1.1 (0.1) 70 0.9 3.9 1.5
HDFCB 17.4 2.8 1.4 (0.1) 0.4 (0.1) 71 1.7 2.1 1.2
KMB 20.8 5.2 3.2 (0.4) 1.1 (0.2) 67 0.5 2.4 1.2
IIB 15.4 2.1 2.8 (0.1) 0.8 (0.0) 72 3.6 4.9 1.6
RBL 15.5 2.6 5.4 0.4 2.1 0.1 62 3.4 9.1 6.5
Bandhan 19.4 2.5 10.8 2.6 3.0 (0.3) 74 11.2 12.4 8.1
Yes 11.5 1.9 15.0 (0.6) 5.6 (0.2) 67 3.6 4.6 0.9
FB 14.1 2.2 3.2 (0.3) 1.1 (0.1) 66 2.6 1.5 0.6
CUBK 18.2 5.2 5.6 (0.0) 3.5 (0.0) 39 6.1 4.2 3.1
KVB 16.8 4.1 7.4 (0.6) 3.0 (0.7) 61 3.1 2.7 0.8
AU SFB 20.5 2.5 3.2 (1.2) 1.7 (0.6) 49 3.6 2.5 1.1
EquitasSFB 21.0 - 4.8 0.1 2.5 0.1 50 9.7 8.0 3.0
DCB 15.3 3.8 4.7 (0.2) 2.6 (0.2) 45 7.8 7.0 2.1
SIB 11.7 4.8 6.7 (1.4) 3.9 (1.2) 44 4.1 5.0 2.8
SBIN 9.8 1.1 4.9 (0.4) 1.5 (0.3) 70 1.6 1.7 0.7
Indian 11.7 1.7 9.6 (0.1) 3.3 (0.2) 68 6.3 4.6 1.9
BOB 11.4 1.2 8.1 (0.8) 2.8 (0.2) 67 3.0 3.5 0.8
CBK 10.1 1.7 8.4 (0.1) 3.2 (0.3) 64 3.0 3.5 0.5
PNB 11.6 1.9 13.6 (0.7) 5.5 (0.4) 63 3.1 5.7 0.5
BOI 13.4 1.5 12.0 (1.5) 2.8 (0.6) 79 6.1 2.8 (0.6)
UNBK 10.2 1.8 12.6 (1.0) 4.6 (0.1) 67 4.1 4.7 2.0
Source: B&K Research. Note: We have used certain assumptions for certain fields. Select banks have not given Covid-19 provisions separately and hence
such provisions are subsumed in Contingent Provisions. ECLGS is kept as unchanged QoQ for select banks. Total Provisions on Total stress is All Specific and
Non-Specific provisions (incl. GP) divided by reported GNPAs+ RSA.
22
Bank-wise Asset Quality Snapshot
Bank-wise asset quality snapshot: Gross stress, total PCR and Net stress
Total Gross Stress Total Non- Total Provisions = Specific
Total PCR on Covid-19
(GNPAs + RSA) - Specific Prov. + Contingent Prov Net Stress Book
Total stress Provision
2QFY22 Provision (Incl. GP) Includes Covid-19
Banks
% of % of
% of NW % % % % of Loans % of NW % of NW
Loans Loans
ICICIBC (Incl. BB & Below) 8.5 42 74 0.8 2.0 6.3 31 2.2 11
AXSB (Incl. BB & Below) 6.7 39 72 0.8 2.1 4.8 28 1.9 11
IIB (Incl. Vodafone) 7.9 39 49 0.3 1.9 3.9 19 4.0 20
Bandhan (Incl. MFI SMA 1+2) 29.9 152 43 - 4.1 12.8 65 17.1 87
ICICIBC 6.7 33 94 0.8 2.0 6.3 31 0.4 2

AXSB 4.7 28 101 0.8 2.1 4.8 28 (0.1) (0)
HDFCB 3.1 17 73 0.6 1.3 2.2 12 0.8 5
KMB 3.8 13 86 0.5 1.1 3.3 11 0.5 2
IIB 6.4 32 61 0.3 1.9 3.9 19 2.5 12
RBL 8.9 41 52 0.2 1.2 4.6 21 4.3 20
Bandhan 22.9 117 56 - 4.1 12.8 65 10.2 52
Yes 20.2 104 60 - 1.0 12.1 62 8.1 42
FB 5.9 45 50 - 0.8 3.0 23 3.0 22
CUBK 11.8 71 29 0.1 1.1 3.4 20 8.4 51
KVB 10.8 77 51 - 0.8 5.5 39 5.3 38
AU SFB 6.8 36 48 0.8 1.7 3.3 17 3.5 19
EquitasSFB 14.6 75 29 - 1.8 4.3 22 10.3 53
DCB 12.6 88 30 0.3 1.7 3.8 27 8.7 61
SIB 10.9 110 35 - 0.9 3.9 39 7.1 71
SBIN 6.6 60 71 0.3 1.1 4.7 43 1.9 18
Indian 16.5 140 49 - 1.1 8.1 69 8.4 72
BOB 11.5 99 57 - 0.8 6.6 57 5.0 43
CBK 11.9 121 54 - 0.7 6.4 65 5.4 55
PNB 18.0 127 56 - 0.7 10.2 71 7.8 55
BOI 19.4 138 59 - 0.9 11.4 82 8.0 57
UNBK 17.9 150 56 - 0.8 10.0 83 8.0 66
Source: B&K Research. Note: We have used certain assumptions for certain fields. Select banks have not given Covid-19 provisions separately and hence
such provisions are subsumed in Contingent Provisions. ECLGS is kept as unchanged QoQ for select banks. Total Provisions on Total stress is All Specific and
Non-Specific provisions (incl. GP) divided by reported GNPAs+ RSA. 23
Theme 2: Loan Growth has already bottomed-out;

02 Private growth likely at >15% YoY

24
Systemic growth has bottomed-out
Systemic credit growth has bottomed-out. Industry growth is ~2 years high!!
Telecom and Power have seen turnaround; Trend reversals in NBFCs should drive healthy delta
Source: RBI, B&K Research

25
Rising appetite for Unsecured credit
Retail credit growth has been steady. System credit pie – some moderation expected
from Bonds / CPs – aiding banking growth
Rising appetite for Unsecured retail.
Source: B&K Research Source: B&K Research 26

Private banks can deliver 15-18% YoY growth
• We see incremental uptick in credit growth across all Pvt. banks are growing at 12% vs ~7% overall
segments – Industry has bottomed-out, Services should
see drag reducing from NBFCs while rising appetite for
Unsecured should also drive retail growth.
• We see credit growth to move from 6-7% YoY now to 12-

13% YoY by FY23E. More importantly, we see Private banks
to growth at 15-18% YoY as non-SBI PSBs shed m/s.
• As of now, SBI has 23 m/s and we expect stable m/s. Non-

SBI PSBs have ~37% m/s which should drop. Essentially,
Private banks can deliver 18-20% YoY growth even if
systemic credit were to grow at 12-13% YoY.
We see systemic growth rising to 12-13% YoY by FY23E, w/w, Private could grow at 15-18% YoY
Source: B&K Research 27

Loan growth: ICICI maintains pole position
• Systemic loan growth is up though remains anemic at 7% Private banks remain growth leaders
YoY, pulled down by large corporate de-leveraging.
• Industry growth has seen some turnaround at 4% YoY,
driven by Power, Telecom, Engineering and Other Infra
segments. Retail growth is moving towards normalization
and is healthy at ~12% YoY, primarily driven by Housing,
Gold and Personal loans. Services have seen sharp
moderation from 8-10% YoY to <1% in Sep’21. Any
improvement here could drive healthy delta in overall
growth.
• ICICI retains growth leadership for 2nd consecutive
quarter at 17% YoY followed by HDFCB. KMB surprised with
8% QoQ loan growth though sustainability is bit uncertain
as yet. Axis is bit laggard.
• Healthy growth in SME, BuB and Retail continues.
ICICI retains the pole position followed by HDFCB. +ve surprise from KMB but -ve from Axis

28
Wholesale growth: SBI seems to be losing m/s
• De-leveraging continues at Metals / Cements with SBI seems to be losing m/s in Corporate
double-digits de-growth YoY. CmRE / Construction
remains in –ve zone.
• However, Industry (manufacturing) has seen healthy
uptick to 4% YoY, which is ~two years high. Large Industry
has now turned positive for the first time since August
2020. Power and Telecom growth has turnaround, in-part
due to low base. Roads remain the bright spot (24-30%
YoY).
• NBFCs (9% of overall credit) growth has seen trend
reversals in Oct 2021 at ~1% vs; -3% YoY in Sept 2021. We
believe this could drive healthy delta in overall growth.
• ICICI, KMB & IIB have seen pick-up in corporate off-late. SBI Source: B&K Research.
seems to be losing m/s.
De-leveraging continues though turnaround for Power / Telecom & trend reversal for NBFCs
YoY Growth (%)
Share in Total
Sector
Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Credit (%)
Textiles 0.4 (0.2) 0.2 1.0 10.2 8.0 4.7 7.7 8.2 7.2 6.9 6.5 6.3 7.0 2.0
Basic Metal & Metal Products (4.1) (4.7) (4.0) (2.4) (2.1) (1.1) (6.1) (12.0) (13.2) (14.6) (13.5) (14.7) (15.9) (16.3) 2.9
Cement & Cement Products (4.2) (4.6) (2.2) (2.6) (0.3) 1.8 (10.1) (14.7) (13.2) (12.1) (21.4) (19.9) (20.8) (21.5) 0.5
Power (1.6) (2.0) (2.0) (1.5) (0.3) 2.6 1.2 0.0 (1.5) (0.9) 0.0 3.1 4.0 6.1 5.9
TeleCommunications 2.8 (14.3) (20.9) (26.6) (36.8) (36.3) (21.0) (17.6) (17.6) (20.5) (13.5) (11.8) (3.6) 4.3 1.1
Roads 12.9 13.6 8.1 8.4 1.4 8.0 33.1 35.5 29.8 28.1 29.7 29.3 24.8 23.5 2.5
CmRE 5.7 3.2 5.6 5.1 2.8 1.6 1.3 2.2 2.6 1.3 0.1 (1.0) (0.2) (0.5) 2.6
NBFC 9.8 7.0 7.8 8.4 20.2 9.2 0.2 3.4 2.2 (2.2) 0.5 (2.5) (2.5) 1.4 9.0

Retail growth driven by secured mortgages
• Mortgages remain the key driver in Retail growth across Retail growth strong across large banks
banks. Unsecured growth picks-up while Gold remains
strong.
• Large banks continue to see 15-20% YoY growth in retail

while IndusInd bank remains in consolidation mode.
• Kotak has seen highest mortgage growth at 29% YoY,

aided by reduction in card rates. ICICI continues to see
~20% YoY growth in mortgages. BoB seems to be loosing
out m/s.
• Barring Axis (had high base), Unsecured has seen healthy

pick up on QoQ basis across large banks, suggesting
rising risk appetite. X-press loans growth continues strong
at ~27%. Source: B&K Research.
Kotak delivered highest mortgage growth; Healthy QoQ growth in Unsecured across banks

30
CASA growth strong; Cornered by Large banks
• Current Accounts (CA) deposits growth for large banks Large banks have seen strong CASA growth
has been strong, in-part aided by recent RBI guidelines in
CA opening.
• IIB / Axis saw muted CA growth. Smaller banks such as

Karnataka, closed ~17K CA a/cs over the past few quarters.
However, RBI seems to have reversed the ruling.
• SA growth is strong across large banks. IIB saw the highest

SA growth though off low base. HDFCB and ICICI have
consistently strong SA.
• Sharp deceleration in SA for Kotak from 30% to ~13% YoY.
• Equitas saw CASA growth at 150/20% YoY/QoQ; CASA share

now at 45% Source: RBI, B&K Research
Strong SA growth at IIB (off low base) while ICICI / HDFCB remain steady. Deceleration for KMB

31
NIMs have held-up well, aided by miniscule Net
slippages
• Costs of deposits (CoD) continues downward trajectory Divergence in NII b/w Private and PSU banks
across banks and may have bottomed. CoD for ICICI is
3.5%; ~20 bps lower than Axis and even 30 bps lower than
SBI.
• NIMs have broadly held-up well QoQ for most of the

banks, in-part aided by negligible net slippages.
• Like-to-like NIMs for HDFCB are ~4.3% (IEA) vs 4.1% reported.
• Huge surprise from ICICI on NII at 25% YoY, ~2x of peers.

Pick-up in NII for HDFCB and sharp drop for KMB (3% YoY).
• Trend - reversal with SBI hiking base rate by 10 bps
• NIMs are likely to remain steady or rising unless Repo rate

hikes are not commensurate with deposits hikes. Source: RBI, B&K Research
NIMs healthy QoQ on negligible Net slippages. ICICI NII growth at 25% YoY, 2x peer banks

32
NIMs to remain in good stead
NIMs have strong +ve co-relation with Interest rates. Share of Repo-linked loans is rising swiftly
Source: RBI, B&K Research. *WADTDR is Weighted Average Domestic Term Deposit Rates. **WALR is Weighted Average Lending Rates . ^Spread is WADTDR - WALR.
Lending spreads are rising while low LDRs provide another trigger for NIMs expansion

33
Bank-wise: NII, PPOP and PAT (FY21-24E)
Bank-wise: NII, PPOP and PAT (FY21-24E)

NII (Rs Bn) FY21 FY22E FY23E FY24E PPoP (Rs Bn) FY21 FY22E FY23E FY24E PAT (Rs Bn) FY21 FY22E FY23E FY24E
Public Sector Banks Public Sector Banks Public Sector Banks
SBI 1,107 1,197 1,307 1,432 SBI 716 694 844 942 SBI 204 314 429 471
Bank of Baroda 288 311 337 371 Bank of Baroda 206 219 237 263 Bank of Baroda 8 80 100 114
Canara 241 259 274 296 Canara 200 213 213 231 Canara 26 51 80 91
Indian 157 167 189 210 Indian 114 127 136 151 Indian 30 38 56 63
Bank of India 143 142 160 173 Bank of India 109 98 100 106 Bank of India 22 37 45 48
PNB 305 276 308 335 PNB 230 193 211 230 PNB 20 46 76 86
Union 247 279 297 314 Union 193 199 202 205 Union 29 49 59 65
Private Sector Banks Private Sector Banks Private Sector Banks

HDFCB 649 730 861 1,022 HDFCB 574 641 756 907 HDFCB 311 370 446 538
ICICI 390 471 533 616 ICICI 364 395 461 542 ICICI 162 231 283 324
Axis 292 327 382 440 Axis 257 266 312 360 Axis 66 148 185 217
KMB 153 166 186 218 KMB 122 124 141 171 KMB 70 76 88 108
IndusInd 135 152 169 196 IndusInd 117 131 142 159 IndusInd 28 48 70 81
Federal 55 60 70 80 Federal 38 40 47 56 Federal 16 20 26 30
RBL 38 39 40 46 RBL 31 33 33 38 RBL 5 3 14 16
Yes 74 62 66 73 Yes 50 33 36 42 Yes (35) 8 15 19
City Union 18 19 22 25 City Union 15 15 17 20 City Union 6 7 9 10
DCB 13 14 15 18 DCB 9 9 9 11 DCB 3 3 5 6
Karnataka 22 24 24 25 Karnataka 20 16 15 15 Karnataka 5 3 3 3
Karur Vysya 24 27 30 34 Karur Vysya 14 16 18 20 Karur Vysya 3 5 8 10
SIB 24 22 24 26 SIB 16 13 13 16 SIB 1 (5) 2 5
Equitas SFB 18 20 25 31 Equitas SFB 9 9 13 18 Equitas SFB 3 2 7 9
RoAs to see healthy expansion
We see healthy RoAs expansion across banks

Credit Costs (%) FY21 FY22E FY23E FY24E RoAs (%) FY21 FY22E FY23E FY24E RoEs (%) FY21 FY22E FY23E FY24E
SBI 1.3 1.1 0.9 0.9 SBI 0.5 0.7 0.9 0.9 SBI 9.3 12.9 15.7 15.3
Bank of Baroda 2.0 1.4 1.3 1.2 Bank of Baroda 0.1 0.7 0.8 0.8 Bank of Baroda 1.2 10.6 11.9 12.3
Canara 2.3 2.1 1.3 1.2 Canara 0.2 0.4 0.7 0.7 Canara 6.1 9.3 13.0 13.2
Indian 2.1 2.0 1.4 1.4 Indian 0.5 0.6 0.8 0.8 Indian 10.0 10.9 14.1 13.9
Bank of India 1.6 1.1 0.8 0.8 Bank of India 0.3 0.5 0.6 0.6 Bank of India 5.6 8.4 9.0 8.9
PNB 3.5 1.9 1.3 1.3 PNB 0.2 0.4 0.6 0.6 PNB 2.3 4.9 7.7 8.1
Union 2.4 2.1 1.8 1.6 Union 0.3 0.5 0.5 0.5 Union 5.1 7.9 8.6 8.8

HDFCB 1.1 1.1 1.1 1.1 HDFCB 1.9 2.0 2.1 2.1 HDFCB 16.2 16.5 17.3 18.0
ICICI 2.4 1.3 1.1 1.2 ICICI 1.4 1.8 1.9 1.9 ICICI 12.6 15.0 16.2 16.2
Axis 2.1 1.1 0.8 0.8 Axis 0.7 1.4 1.5 1.6 Axis 7.1 13.8 15.1 15.6
KMB 0.8 1.2 0.9 0.8 KMB 1.9 1.9 2.0 2.1 KMB 12.5 11.4 11.8 12.8
IndusInd 3.5 2.9 1.7 1.7 IndusInd 0.8 1.3 1.7 1.7 IndusInd 7.4 10.8 14.3 14.5
Federal 1.3 1.1 0.8 0.9 Federal 0.8 0.9 1.1 1.1 Federal 10.0 11.0 12.9 13.0
RBL 4.0 4.7 2.1 2.0 RBL 0.5 0.3 1.3 1.4 RBL 4.4 2.2 10.3 11.3
Yes 4.9 1.3 0.7 0.7 Yes (1.3) 0.3 0.5 0.6 Yes (12.6) 2.3 4.4 5.1
City Union 2.0 1.9 1.5 1.5 City Union 1.2 1.4 1.4 1.5 City Union 10.7 12.0 12.3 12.9
DCB 1.7 1.7 1.1 0.8 DCB 0.9 0.7 1.0 1.1 DCB 10.0 8.1 11.4 13.5
Karnataka 2.3 2.4 1.9 1.8 Karnataka 0.6 0.3 0.3 0.3 Karnataka 8.1 4.4 4.3 4.6
Karur Vysya 1.5 1.7 1.2 1.0 Karur Vysya 0.5 0.7 0.9 1.0 Karur Vysya 5.0 7.4 10.2 11.4
SIB 2.3 3.2 1.6 1.4 SIB 0.1 (0.5) 0.2 0.5 SIB 1.2 (9.7) 4.3 8.8
Equitas SFB 3.3 3.0 1.5 1.7 Equitas SFB 1.3 0.9 2.1 2.1 Equitas SFB 9.3 7.0 17.5 19.2
35


36
Digital landscape evolving; SME / small-ticket high-
volume loans likely to see paradigm shift
India is one of the hottest Fin-tech markets driven by strong underlying drivers. India has strong digital infrastructures, deep
under-penetrated financial services, higher cost of physical services, young demographics, tech-savvy users and reasonably
flexible regulators.
Retail Payment space has been clearly dominated by Fin-techs. Google Pay, PhonePe, PayTM control over 90% UPI m/s.
Fin-techs have got capital and customers, can attract talent and have reasonable flexibility. However, lending is NOT an easy
skill to master, especially in collection. Regulations are still evolving and big unknown.
Fin-techs have adopted collaborative approach so far. Not much instances of head-on competition seen in lending yet. Fin-
techs are still focused on non-lending revenue sources. They could be big disruptor in case they get the lending mechanism
right.
At system level, ‘Other income’ is 1/3rd of net revenue, it becomes ~60% of adjusted for provisions Net revenue. However, a large
part of Other income is clearly lending / liability linked and hence less at risks. TPD income at system levels would be limited at
Rs 100 bn only.
Account Aggregator and Open Credit Enablement Network (OCEN) could lead to paradigm shift in Retail / SME lending.
While P2M / P2P, may not be remunerative, there is clear opportunity for Merchant lending. All banks have thrown their hats in
the ring. HDFCB aims to grow 10x in this over the next 3-5 years. Globally, commerce enablement appears to be the next
frontier for Fin-techs. SME focused banks may face revenue / growth issues.
Small ticket lending is likely to explode due to exponential digitization of small payment (UPI QR codes) and as Fin-techs test
their lending mechanisms. Just like UPI and new age broking, we believe it should expand the overall market .
Fin-tech competition could have multiple facets. Fin-tech + Bank combo could be game changer.
Regulations are still evolving and intent seems pro-consumer and thus could disrupt the business models for Fin-techs.
Regulation is clearly the ‘elephant in the room’. RBI WG effectively prescribes lending by only Regulated entities and effective
ban on FLDG structure.
We see some merits in NITI Aayog proposals for Digital bank for Fin-techs which would solve the financial inclusion while
maintaining systemic risks and providing reasonable maneuverability for the Fin-techs.
Within incumbents, we see ICICI bank at the forefront of digital capabilities. HDFCB is yet to get the full clearance for Digital
activities. Axis / KMB / IIB etc. also seems to be stepping-up. Within PSUs, SBI is strong while Non-SBI PSU banks are behind-the-
curve. Within smaller banks, Federal bank appears very active in Fin-tech / digital adoption.
37
India STACK
India STACK to propel strong digital adoption across financial services
Source: ispirt, B&K Research.

38
Strong growth in retail digital payments
• Massive rise in Retail digital payments in India. The Exponential growth in Retail digital payments
absolute amount has become 2.5x in FY17-21 period.
• By volume, retail payment clocked 44 bn transactions in

FY21 and Rs 359 trillion by value.
• Within 5 years, UPI has outpaced debit / credit

transaction. UPI is more than 3.5x of Debit and Credit
cards spend combined.
Digital channels now account for >85-90% of retail payment pie by value and volume
39
Exponential growth in UPI; ticket size also rising
UPI transaction growth is exponential; Value is 3.5x of combined debit and credit cards
UPI has cornered over 35% market share in overall. Rising ticket size suggesting of rising comfort

40
Payment space clearly dominated by Fin-techs
• Payment space has been clearly dominated by Fin-techs. 20% m/s for Payment banks in UPI beneficiaries
• GooglePay, PhonePe and PayTM combined account for
93-94% of UPI m/s by volume and value.
• Such a strong m/s gain by Fin-techs was possible as

incumbent banks were not much interested in UPI due to
zero MDR.
• However, select fin-techs are looking to charge

customers.
• The huge rise in QR codes vs POS also shows strong

acceptance for UPI by merchants as well.
PhonePe, Google Pay and PayTM dominate the UPI payment space

41
AA / OCEN to drive a paradigm shift in Retail / SME
lending and Open banking
AA / OCEN to drive a paradigm shift in Retail / SME lending and Open banking
Source: iSPIRT, B&K Research
AA / OCEN could address the fundamental issues for under-penetration of SME financing

42
Fin-techs have capital / customers but Lending NOT an
easy skill to master
• Fin-techs have got reasonably favorable regulatory environment. There is still soft touch regulations for them.
• Fin-tech now have strong capital base and capital availability and thus attracting Talent is also not much issue.
• However, lending is NOT an easy skills to master especially in the area of collection. We have seen the credit costs for select
products have gone through the roof especially amidst Covid-19.
• We have seen exponentially higher credit costs for select Fin-techs especially on BNPL.
• Recent RBI Working Group report has proposed to keep lending restricted to Regulated entities. It also talks about
disallowing FLDG (Fixed loss default guarantee) and any synthetic lending structure.
Fin-techs have earned strong customer base as well as merchant base.
Source: Company Data, B&K Research, Note: *Monthly active users. **Monthly transacting users.
43
Collaborative approach so far….focusing on fee income
• Fin-techs have adopted collaborative approach so far. Most of them are focused on better UI / UX and solving one set of
problems.
• Not much instances of head-on competition seen in lending yet. Majority of the focus is on better customer engagement
to drive non-lending revenue. The partnership for select Fin-techs and banks is also mostly non-exclusive.
• For FY20, systemic NII stood at Rs 4.9 trn and Other income was Rs 2.3 trn making total net revenue at Rs 7.3 trn. NII share is
67%. However, there are huge provisioning costs which are predominantly associated with lending. We deduct the
provisioning from NII to arrive at Adjusted NII at Rs 1.7 trn. Thus, the share of Adj NII in adjusted Net revenue reduces to just
42%.
• In a way, Other income accounts for 33% of revenue but 58% of adjusted revenue.
• Within Other income, the share of CEB / Forex / Misc is ~Rs 2.0 trillion. We believe a large part is linked to liability, lending, and
businesses and hence broadly insulated from Fin-techs. The total TPD income pool for the system would be ~Rs 100 bn only,
which could be at risk.
Other income is ~33% of net revenue and ~58% of Adj net revenue. TPD income est. at ~Rs100bn.

44
Lending ticket size has started declining and it is just the
start
• We have seen moderation of ticket sizes in Consumer ATS in Mortgage and SME loans have fallen…
credit as the lending has become more democratized.
• We expect further reduction in Average ticket size as

lending to hitherto inaccessible customer base explodes.
• This would require digital preparedness to manage cost

of acquisition and origination, servicing and monitoring.
• Fin-techs may have a lead here and would help

accentuate the trend.
Source: BCG
…and so is the case elsewhere as Finance reaches to hitherto inaccessible segments
Source: BCG
45
Small-ticket lending will explode
• Globally, there is a surge in small-ticket high volume Exponential growth expected in BNPL
lending or BNPL (Buy Now Pay Later) type transactions.
This is possible as Cost of acquisition / Servicing /
monitoring has come down dramatically.
• The strong digital payment foot-prints would allow easy

credit to New to Credit customers, a large majority.
Convenience could also drive ETB ETC customer as well.
• Fin-tech have also started to test their credit algos using

small loans. AA/OCEN to propel small-ticket lending.
• We believe this would expand the overall pie (vs any

cannibalization) . Source: Redseer, B&K Research
POS has been stagnant while UPI QR codes have exploded. Digital trail for small payments as well
Source: BCG
46
An almost re-play of what happened in payments
Fin-techs could revolutionize the small ticket lending pie just the way UPI did to payments
Source: BCG
47
Commerce enablement is the new frontier
Globally, commerce enablement is the new frontier for Fin-techs
Source: McKinsey, B&K Research

48
Commerce enablement is the new frontier
Fin-tech can look at increasing their share of merchant wallets
Source: McKinsey, B&K Research

49
Large opportunity in small merchant ecosystem
• While P2M / P2P, may not be remunerative, there is clear ICICI bank – Super merchant STACK
opportunity for Merchant lending.
• All banks have thrown their hats in the ring. HDFCB has
stepped up Merchant Acceptance Points (MAP) from ~1mn
in FY19 to 2 mn in FY21 and now plans to grow 10x in the
next 3-5 years.
• Axis bank plans to digitize Kirana store. ICICI has

introduced Super Merchant STACK. IIB has also stepped
up on merchant acquisition from <8k in FY20 to 170k in FY21
and even higher in FY22.
• While this should expand the pie, it could also mean

tougher times for commercial / SME focused banks. Source: Company
Explosive growth opportunity in merchants GMV. HDFCB aims 10x growth in MAP 3-5 years
Source: Redseer Source: B&K Research
50
SME and Small ticket lending could see exponential rise
• Credit penetration in Retail and MSME segment is abysmally low due to multiple structural reasons though digital could be
key enabler.
• AA / OCEN framework, given its focus on consolidated profile, at one stop along with data / information on non-financial
transactions, would help bridge the information asymmetry.
• Real time flow of data, rising digital print, involvement of Loan Service Providers, Open architecture, should lower customer
acquisition, monitoring costs, TAT, and help scale the volumes.
• Good experience for customers and lenders alike would also start a virtuous cycle and strong network effect.
• Apart from the current unmet demand, AA / OCEN framework could also potentially unlock New Use Cases using
appropriately sourced, sized, priced and timed credit products.
• Rising digitization of payment (QR codes vs cash) should enable lenders comfort and a explosive growth.
AA / OCEN and rising SME digital foot-print could bridge the massive credit gap.
51
…may be similar to what happened in Broking
New age broking dramatically expanded the pie driven by multiple reasons including customer
convenience. We argue similar explosion in Small ticket lending pie is possible.
52
SME lending recent trends in India
O/s SME lending growth muted. However, disbursements have risen due to ECLGS
Source: MSME Pulse, B&K Research
Some dip in rating profile of SME post Covid. Transition matrix shows both side movements

53
SME lending recent trends in India
MSME stress differs across lenders and size of the loans
Behavior of SME pre and Post Covid-19

54
Collaboration vs competition
• Fin-tech competition could have multiple facets. Fin-tech RBL-BAF became a potent combination
support for a bank could be game changer.
• RBL – BAF combination in co-branded credit card offering

clearly shows the delta between banks in a short span of
time.
• ICICI Amazon partnership for Co-branded credit card is a

massive hit. The bank has seen 3 mn customers through
this channel. Alternatively, the entire market share gains
at ICICI credit cards have come from Amazon side; else
the m/s is stagnant.
Almost the entire m/s gains at ICICIBC credit cards have come from Amazon co-branded card
55
Regulations could disrupt Fin-Techs!! Elephant in the
room
• RBI has released its working group report discussing proposed framework for Digital lending in India. While this is draft
report and hence the recommendation are not final yet, it nonetheless gives the broad thought process on the entire
digital lending landscape.
• Interestingly, RBI believes that protection of financial consumer’s interest would always weigh heavier than the interest of
innovation.
• The report talks about self-regulation (SRO) framework of the digital lending and intends to address Regulatory arbitrage.
Overall, the report appears to be a well thought out attempt to provide a regulatory framework for Fin-techs, which in a
way can limit the flexibility of Fin-techs (though should not stifle the innovation).
• 3 key principles: A) Technology Neutrality: Neutrality towards technological differentials or business models while
encouraging competition to maximize the benefits to the financial system. B) Principle Backed Regulation: Instead of a
rule-based regime, a principle-backed approach to provide sufficient scope for innovation and adaptability in a dynamic
environment. C) Addressing Regulatory Arbitrage: Addressing the arbitrage between different sets of entities in the digital
lending ecosystem to ensure level playing field and market integrity. The same regulatory conditions and supervision
should apply to all actors who seek to innovate and compete on FinTech: incumbent banks, FinTech start-ups and BigTech
firms.
• Balance sheet lending through DLAs restricted to entities regulated and authorized by RBI. Prohibiting REs from entering into
arrangements involving synthetic structures (FLDG) with unregulated entities. Separate legislation to prevent illegal digital
lending.
• A Self-Regulatory Organization (SRO) should be constituted covering the participants in the digital lending ecosystem
• Compliance with the prescribed baseline technology standards. Data should be stored in servers located in India.
• Algorithm used for underwriting should be auditable.
• Each lender should provide a key fact statement in a standardized format. Data collection with prior and explicit consent of
borrowers with verifiable audit trails.
• Standardized code of conduct for recovery to be framed by the proposed SRO in consultation with RBI.
• Reporting of lending done by REs through DLAs to credit bureaus. Penal actions by the RBI if credit reporting not adhered.
56
NITI Aayog pitches for Digital Bank
• Reserve Bank seems to be agreeing with varied degree of regulation of a financial entity commensurate with the risk the
entity poses to the financial system. This approach has been advocated in the circular on ‘Scale Based Supervision’.
• The WG also suggests Regulations for the operations of so-called ‘digital banks’/ ‘neo banks’ formulation. Encouragement
for ‘digital only’ NBFCs and initiation of digital only banks.
• While regulatory innovation has catalysed payments sector reforms the principal beast of burden for credit delivery and
issuance of demand deposits, i.e. the incumbent bank has remained undisrupted. Most of these reforms upended the user
experience, i.e. the engagement layer of payments but making little improvement in the core utility banking layer.
• Partly flowing from that inertia, the country still has large segments who have not befitted from this digital revolution
• Since the informal debt is not visible in the credit bureaus, lenders exercise rational apathy towards funding the MSME
segment. In other words, the costs of due diligence that a bank will incur towards evaluating the credit risk adjusted against
the ticket-size and the yield from the loan make it unviable.
• So, even in cases where the bank may otherwise be willing to fund a prospect, the adjacent documentation cannot be
produced readily. In such cases, it is trite that the MSE owner will rationally opt-out and prefer the informal markets with
their light-touch processes. Thus there is both demand-side and supply-side friction that results in “market failure” in the
formal MSME debt markets.
• Creating a new licensing / regulatory framework (for Digital Bank) is being proposed as regulatory innovation and not as
regulatory arbitrage. Having said that, Digital Bank offers a differentiated proposition and as such, there is scope for
differentiated treatment in adjacent areas of their operation while treating them identical with incumbent commercial
banks in the critical areas of prudential and liquidity risk.
57


58
Banks’ Pecking Order
Key Themes and Banks’ Pecking Order
Asset Quality: Asset Quality outcomes have been better and credit costs have already peaked. MFI slippages / credit costs to
be elevated in 2HFY22. But overall, there could be the beginning of multi-year benign credit costs cycle. ECLGS would be tested
in 3QFY22 but do not see much risks as yet.
Growth: Growth is an issue but has already bottomed out. Large banks well placed and getting aggressive on Commercial
segment and thus we see headwinds for Regional banks. We estimate overall systemic growth to rise to 12-13% YoY by FY23E.
Fin-Tech disruption: See collaborative approach vs competitive approach by Fin-techs; Big disruption if Fin-techs can get the
lending right. RBI WG has proposed strict guidelines for lending by Fin-techs. See most action in SME / small-ticket high volume
retail lending. Commerce enablement could be the new frontier. While this along with AA / OCEN should enlarge the entire SME
pie but potential headwinds for SME focused banks.
Large banks are well placed on Asset Quality, Growth, NIMs, CASA Capital and Digital preparedness.
Mid-size banks still fine-tuning select part of their businesses. SME lending could see transformation changes.
PSU banks - Asset Quality cycle turning is huge cyclical +ve for PSBs though Core PPOP is still weak at <2%.
Top Picks: ICICI, HDFCB and SBI. Kotak is key U/W. Positive Risk rewards for Axis and IIB. See strong case for HDFCB vs KMB.
59
Large Banks better placed (1/4)
Large Banks are better placed on Growth, Capital, CoD, Large banks better placed on growth
CASA, Asset quality, and have an edge on Loan mix.
ICICI and HDFCB to do well on growth. KMB has CoF edge

now.
IIB, RBL and Yes still re-working wholesale strategy though CV

/ Credit card at IIB and RBL resp. should see healthy grwoth.
FB, CUB, KVB – Core SME growth may still be tepid.
Large banks also have all time high CET 1 levels and strong
digital capabilities.
Large banks have higher share of Large corporate and

Salaried Retail (though have higher Unsecured PL/CC). Have
low SME / Mid-Corp / Self-employed / MFI (more affected by Source: RBI, B&K Research
Covid-19).
Large banks continue to have edge on CoD, CASA and Retail / granular deposits
Source: Company Data, B&K Research. Note: Share of Retail Deposits for SBI and CUBK is as on 4QFY21.
60
Mid-size Private banks are niche lenders. Large Private have healthy and rising PPoP
Capital Position across banks is very strong more so for large private banks

61
All banks – Net stress as % of NW
Large banks have strong non-PCR buffer. Total PCR is strong at >70% for large banks; IIB at ~50%
Source: Company Data, B&K Research. Note: ICICI and Axis figures includes BB and below book while IIB figures include stressed Telecom exposure
62
RoAs to see healthy expansion
We see healthy RoAs expansion across banks.

Credit Costs (%) FY21 FY22E FY23E FY24E RoAs (%) FY21 FY22E FY23E FY24E RoEs (%) FY21 FY22E FY23E FY24E
SBI 1.3 1.1 0.9 0.9 SBI 0.5 0.7 0.9 0.9 SBI 9.3 12.9 15.7 15.3
Bank of Baroda 2.0 1.4 1.3 1.2 Bank of Baroda 0.1 0.7 0.8 0.8 Bank of Baroda 1.2 10.6 11.9 12.3
Canara 2.3 2.1 1.3 1.2 Canara 0.2 0.4 0.7 0.7 Canara 6.1 9.3 13.0 13.2
Indian 2.1 2.0 1.4 1.4 Indian 0.5 0.6 0.8 0.8 Indian 10.0 10.9 14.1 13.9
Bank of India 1.6 1.1 0.8 0.8 Bank of India 0.3 0.5 0.6 0.6 Bank of India 5.6 8.4 9.0 8.9
PNB 3.5 1.9 1.3 1.3 PNB 0.2 0.4 0.6 0.6 PNB 2.3 4.9 7.7 8.1
Union 2.4 2.1 1.8 1.6 Union 0.3 0.5 0.5 0.5 Union 5.1 7.9 8.6 8.8

HDFCB 1.1 1.1 1.1 1.1 HDFCB 1.9 2.0 2.1 2.1 HDFCB 16.2 16.5 17.3 18.0
ICICI 2.4 1.3 1.1 1.2 ICICI 1.4 1.8 1.9 1.9 ICICI 12.6 15.0 16.2 16.2
Axis 2.1 1.1 0.8 0.8 Axis 0.7 1.4 1.5 1.6 Axis 7.1 13.8 15.1 15.6
KMB 0.8 1.2 0.9 0.8 KMB 1.9 1.9 2.0 2.1 KMB 12.5 11.4 11.8 12.8
IndusInd 3.5 2.9 1.7 1.7 IndusInd 0.8 1.3 1.7 1.7 IndusInd 7.4 10.8 14.3 14.5
Federal 1.3 1.1 0.8 0.9 Federal 0.8 0.9 1.1 1.1 Federal 10.0 11.0 12.9 13.0
RBL 4.0 4.7 2.1 2.0 RBL 0.5 0.3 1.3 1.4 RBL 4.4 2.2 10.3 11.3
Yes 4.9 1.3 0.7 0.7 Yes (1.3) 0.3 0.5 0.6 Yes (12.6) 2.3 4.4 5.1
City Union 2.0 1.9 1.5 1.5 City Union 1.2 1.4 1.4 1.5 City Union 10.7 12.0 12.3 12.9
DCB 1.7 1.7 1.1 0.8 DCB 0.9 0.7 1.0 1.1 DCB 10.0 8.1 11.4 13.5
Karnataka 2.3 2.4 1.9 1.8 Karnataka 0.6 0.3 0.3 0.3 Karnataka 8.1 4.4 4.3 4.6
Karur Vysya 1.5 1.7 1.2 1.0 Karur Vysya 0.5 0.7 0.9 1.0 Karur Vysya 5.0 7.4 10.2 11.4
SIB 2.3 3.2 1.6 1.4 SIB 0.1 (0.5) 0.2 0.5 SIB 1.2 (9.7) 4.3 8.8
Equitas SFB 3.3 3.0 1.5 1.7 Equitas SFB 1.3 0.9 2.1 2.1 Equitas SFB 9.3 7.0 17.5 19.2
63
ICICI Bank Maintain BUY
ICICI Bank is the second largest private bank in India. The bank has strong presence across entire gamut of financial services
including Insurance, AMC, Broking, Capital Markets, AIF etc. Mr. Sandeep Bakhshi has been the MD&CEO since October 2018.
Investment rationale
• Emerged as growth leader led by strong retail growth: Retail has been the key growth driver with ~20% CAGR from FY15-
FY21; share of retail loans have increased to 62% from 40% over the past few years. Within retail, growth has been driven by
mortgages and unsecured loans (off low base). Wholesale lending has been completely overhauled with strict focus on
highly rated, granular and transactional exposure and de-focus on risky project, M&A and non-India linked overseas book.
Despite Covid-19, the bank has emerged as a new growth leader across banks at >17% for past couple of quarters.
• Core PPoP growth steady at >15%: NIMs have been broadly steady over the past few years, aided by change in loan mix.
Fee profile has remained strong and granular in nature and extensive digital franchise. Very importantly, we believe the
bank has shown strong execution in pursuing profitable growth with Core Operating profits growth at ≥15% consistently for
11th consecutive quarters.
• Covid-19 stress has peaked; Credit costs to normalize swiftly: Asset quality has improved significantly over the past few
years led by aggressive clean-up of legacy stress and prudent underwriting. Despite Covid-19, net slippages are well under
control with 2QFY22 net slippages negligible at 0.1%. Net NPAs are low at <1% and Restructured loans are also contained at
1.3%. The bank has also built strong contingent buffer at ~2%. ‘BB and below’ book has been credit tested and O/s has come
down to <2%. We expects credit cost to normalize by FY23E.
• Fast evolving as full-stack digital bank: The bank has been fast evolving into full-stack digital bank with several industry
leading offerings and end-to-end digital solutions. The bank is leveraging digital capability as the force multiplier in all
aspects and has product-agnostic but customer-centric solutions approach; thus is all set to ride the digital boom, in our
view. We see the strong digital capability as a structural business moat encompassing customer acquisition, growth,
efficiency, risk management and profitability.
The bank is likely to further cement its position of growth leadership in coming quarters driven by superior liability mix and
strong digital capabilities. The bank has managed Covid-19 very well with the un-provided stress book (including BB and
below book) at ~2% of loans and ~11% of Net-worth. We estimate decade high RoAs / RoEs at 1.9 /16.0% respectively for FY23-
24E. Valuations at ~2.1x FY23 core banking ABV are attractive. Maintain Buy with Target Price at Rs 950 (valuing the core
bank at 3.0x). ICICI bank is the top banking idea.
64
ICICI Bank: Growth / Digital leadership with decade high
expected RoAs
ICICI is the growth leader now. Core PPoP growth strong at ≥15% for 11th consecutive quarter
Decade high RoAs / RoEs at 1.9/16% by FY23E driven by steady PPoP and easing Credit costs

65
HDFC Bank Maintain BUY
HDFC Bank is the largest Indian bank by market cap and the largest private banks by assets. The bank has almost impeccable
track record of delivering > 20% PAT growth over the last 20 years. The bank is the market leader in Personal loans, Credit Card,
Auto Loans and hence a key proxy for rising consumerism in India. Mr. Sashi Jagdishan succeeded Mr Aditya Puri as MD&CEO in
October 2020.
• Strong growth stance; NII growth has bottomed-out: HFC Bank has the largest distribution, diversified product portfolio,
and strong working capital loan proposition, enabling it to toggle retail or wholesale loans depending on the opportunities.
During Covid-19, the bank focused more on top rate wholesale book and Sovereign exposures, thus NII came under a bit of
pressure. Retail growth has now stepped-up from below system levels to 13% YoY in 2QFY22. The new MD&CEO aims to
double the commercial book (~33% of the overall loans) in next 2 years. With healthy retail / commercial / credit card
growth, we believe that NII growth has already bottomed-out in 1QFY22 (9% YoY; 2QFY22 at 12% YoY) and should sustain its
upward journey along with NIMs uptick.
• Credit card ban lifted; Digital / Fin-tech capabilities hiked; PayTM tie-up in place: The bank has stepped-up its digital
capabilities with a) UPI capacity has been tripled and; b) Net banking and Mobile banking capacity has been doubled.
Overall, the bank is confident of handling potential load for the next 3-5 years!!. Since the lifting of new credit card
issuance ban in August 2021, bank has started to re-coup its lost m/s. The non-exclusive tie-up with PayTM for credit cards
with special focus on millennials, business owners and merchant should fuel quality customer acquisition and sustainable
revenue stream.
• Impeccable asset quality despite Covid-19 shock: Despite carrying highest share of unsecured personal loans, the bank
has maintained the best asset quality in Indian financial sector across asset quality cycles driven by strong risk
management practices, strong monitoring and prudent customer selection. Despite Covid-19 disruption, the total net
stressed book is contained at just <1%. The bank has the history of creating prudential provisioning (even higher than
reported net NPAs).
• Valuations attractive with overhangs behind and strong >2% RoAs and >17% CET 1: We expect healthy loan growth driven
by Commercial and Retail segment (vs corporate grwoth) over FY22-24E. Resumption of credit card should also lead to NII
growth. We expect the bank to deliver ~20% PAT CAGR (FY22-24E) leading to amongst highest ~2.1% RoAs and 18% RoEs.
Most of the overhangs surrounding the stock have either receded or should recede over the next 1-2 quarters with retail /
commercial growth rising, NII growth picking-up and digital capabilities firming-up. The bank can actually surprise on
growth as well as NIMs given their historical track record. We find valuations at ~3x FY23E ABV and 18x FY23 EPS, very
attractive and maintain Buy with unrevised TP at Rs 2,000.
66
HDFCB
NII growth has bottomed-out while resumption of Credit card should aid NII / NIMs expansion.
Valuations are attractive with stock trading at ~3.0x FY21 ABV with RoEs improving further to ~18%.

67
HDFC Bank vs Kotak (1/4)
• HDFC Bank and Kotak Mahindra are both Quality franchise.
• Kotak has unparalleled conservativism, seen strong CASA, growth uptick, has amongst lowest CoF, and hence embedded
optionality.
• However, Cyclical changes in Asset quality, limited tenure of MD&CEO and NII/ growth trade-off could blunt the above
edges.
• Negatively surprised by huge ECLGS share at Kotak. Outsized ECLGS has implications on a) AQ; b) Growth and c) Franchise
 22% of the total loans at Kotak bank are SME / Self-employed / LAP etc. where asset quality uncertainty would remain till
FY23E. HDFCB has only 10% loans linked under ECLGS.
 ECLGS can be argued to be a growth drag as banks may not want to push growth here.
• CASA share is the highest at Kotak but is boosted by muted TD. HDFCB is delivering higher SA growth than KMB on >3x base.
• While Kotak has strong CoF edge (lowest across all banks), it may not translate too much into growth. The focus is on
secured products such as Home loans and SME. Lower CoF, is necessary but not sufficient condition for Home loan growth.
It should be accompanied by a) feet on street; b) Builder tie-up and c) large pool of Corporate Salaried customers.
• HDFCB – Management succession has been largely smooth. Key investors’ concern – a) weak NII growth and b) Digital
preparedness – seem to have largely addressed. We believe NII growth has already bottomed-out for HDFCB.
• KMB saw a sharp moderation in NII in 2QFY22. Also, management transition could lead to time de-rating as seen in HDFCB.
• Valuations: Both Have similar RoAs but ROE differential is too much to ignore. HDFCB would have 17-0-18% ROE vs 12-13% for
KMB. ABV CAGR for FY21-23 is 16% for HDFCB vs 12-13% for KMB.
• At standardized 4x FY23E ABV, the upside for HDFCB would be ~30% vs just 5% for KMB. Prefer HDFCB over KMB.
68
HDFCB vs KMB (2/4)
Sharp divergence in growth trajectory for both banks. Sharp divergence in NII as well
HDFCB is generating much superior CASA growth despite 2-3x higher base
69
HDFCB vs KMB (3/4)
KMB has outperformed HDFCB recently on later digital issues We see the reversals of recent outperformance
and weak NII growth.
However, we see that reversing as HDFCB delivers on NII and

steps up its digital capabilities.
On Asset quality, both banks are quality names. However,

HDFCB has fared better in terms of GNPA, NPAs and gross /
net slippages.
However, KMB has much lower RSA than that at HDFCB.
Asset Quality: Both are quality banks though HDFCB fared a bit better
70
Oversized ECLGS – Multiple implications (4/4)
ECLGS Pro-portion outsized for Kotak – Multiple implications
• We are negatively surprised by the outsized ECLGS disbursements at Kotak. ECLGS disbursement should be multiplied by 5x
so as to get the impacted book. Kotak has 22-23% of loans vs 10% for HDFCB / Sector
• Till 1QFY21, KMB acknowledged some sort of stress in these accounts though in 2QFY22, the bank believes that there is no
material difference in the riskiness of ECLGS vs rest.
• Clearly, 22% of the total loans at Kotak are SME / Self-employed / LAP etc. where asset quality uncertainty would remain till
FY23E. ECLGS can be argued to be a growth drag as banks may not want to push growth though KMB commentary has
changed a bit here.
• Despite strong liability build-up, it appears that share of Corporate Salaried customers are much less at Kotak.
KMB has the highest share of ECLGS loans disbursements
71
State Bank of India Maintain BUY
Best-in-class Asset Quality; Profitability to rise even further. Growth revival to lead to sharp re-rating
State Bank of India (SBI) is the largest bank in India with around 25% market share in loans and deposits. The bank serves over
440 mn customers through the largest network of 22,000+ branches. It is also the holding company for SBI Credit Card, Life /
General Insurance, MF and Capital Market intermediaries. Mr. Dinesh Khara was appointed as Chairman in October 2020 for 3
years.
• Overall growth soft but retail healthy: Unlike other PSU banks which have consistently ceded market share, SBI despite it
having ~23-25% m/s, has largely maintained its m/s. Considering huge m/s, overall growth is likely to mimic systemic
growth. Importantly, the bank has continued strong growth in retail portfolio led by Unsecured Personal loans (X-Press
credit, mainly to PSU employee) and Home loans. Within 3-4 years, the bank has built the largest Unsecured PL book with
industry best NPAs, which have been tested in Covid as well. We expect the strong retail growth to sustain for the bank.
• Strong liability franchise; NIMs healthy: The bank has strong liability franchise driven by brand, trust and outreach. The
bank has around 25% market share in systemic deposits and is the price setter in the Industry. CASA share has been strong
at ~45%. 2QFY22 saw sharp NIMs uptick (up 32 bps QoQ) to 3.24% and should get a boost going ahead from rising LDR /
growth and lower NPAs drag.
• Expect multi-years high RoA / RoEs; CET 1 healthy: The bank has absorbed the full family pension hit in 2QFY22 and despite
that reported 66 bps RoAs aided by miniscule credit costs. We expect the bank to report multi-year high RoAs at ~0.85% for
both FY23/24E with RoEs improving to ~15%, led by steady operating earnings and easing credit costs normalization. CET 1
remains healthy at ~10%.
• Asset Quality Super Cycle has ended; Covid-19 stress manageable: Over the last few quarters, asset quality performance
has been amongst best-in-Industry. Despite covid-19 led disruptions, annualized slippages for FY21 / 1HFY22 were contained
at 1.3% / 1.7% of loans though the bank does inter-quarter netting off. Net slippages for 2QFY22 were negative. Overall GNPAs
is now at 4.9% with 70% PCR resulting in Net NPAs at just 1.52%. We model-in 1.8/1.7/1.5% slippages for FY22/23/24E, which along
with stable PCR should translate to Credit costs moderating to <100 bps by FY23E. The bank is key beneficiary of rising NPA
resolution as well.
SBI stands out across all PSBs due to its dominant presence, management depth, strong deposits and retail franchise, and
contribution from Subs. Amidst Covid-19 disruption, the bank has managed asset quality even better than some of the
large private peers. NNPAs (1.5%), RSA (1.6%), and SMA 1+2 (27 bps) are very manageable. While the bank has reported
highest ever PAT, we see further rise in profitability going ahead. Overall, we believe the bank stands well positioned for
multi-years high RoAs with upside risks from higher-than-expected growth and NIMs. Overall risk returns remain
attractive with stock trading at ~0.9x FY23 Core banking book.
72
SBI: Strong Retail growth; Net stress benign
SBIN has continued strong retail growth led by Housing and Unsecured while Corporate is muted
We see RoAs/ RoEs rising to multi-years high at ~0.85% /15% by FY23/24E.

73
Axis Bank Maintain BUY
Axis bank is the third largest private sector bank with assets size of Rs 9.4 trillion. The bank has a large footprint of 4,500+
branches and 12,000+ ATMs spread across the country. Mr. Amitabh Chaudhary (ex-HDFC Life) was appointed as MD&CEO in
January 2019.
• Healthy growth led by Retail; Strong liability: Loan growth has been strong with 15% CAGR (FY15-21), led by retail loans
(~20% CAGR). Share of retail increased from 40% in FY15 to 56% in 2QFY22. Positively, covid-19 led disruptions seem to be over
as retail disbursements have seen sharp rebound, though muted corporate growth remains a drag. Liability profile is solid
with CASA at 45% and Retail deposits + CASA at 84%.
• NIMs to rise although gradually; needs to work on steady Core PPOP: NIMs have held up well supported by easing cost of
deposits, rising mix of retail loans and spread management. We believe strong CASA, utilization of excess liquidity,
favorable loan mix, contained interest reversals and receding RIDF drag (6-8% of loan book) should drive gradual NIMs
expansion going ahead. Core PPOP growth has been volatile and the bank needs to work on this metrices, in our view, We
expect ~15% CAGR for FY22-24E.
• Managed Covid-19 well; Asset quality outlook positive: The asset quality super cycle, which started in FY16, has ended.
The bank has managed Covid-19 phase very well with net NPAs at ~1.1% and amongst lowest restructured loans at <1%. Gross
slippages have been driven by retail, primarily coming from unsecured book but have low tail risk. Moreover, BBB book has
become much granular with ATS at <Rs 1 bn and BB and below book subsumes almost entire wholesale restructured loans
and stands reduced at <2%. We expect sharp improvement in Gross and Net NPAs by FY23/24E.
• Stepped-up on prudence; PCR strong: The bank has stepped-up on prudence on almost every aspect in terms of Interest
recognition, fee amortization, up-fronting stress, building-up contingency reserves, opex, etc. The bank has strong PCR at
~70% and also carries >2% of non-specific provisions, amongst highest across banks.
• Sharp expansion in RoA / RoEs to 1.5/15.0%; CET 1 strong: We expect healthy top-line growth along with moderation in
credit costs should drive sharp ROAs expansion from 0.7% in FY21 to 1.5% by FY23-24. RoEs are expected at 15-16% by FY23-
24EE.
While the standalone performance of Axis bank has been reasonable, it continues to lag behind its peers on growth, NIMs,
core –operating earnings growth and in-part on asset quality as well. Positively, the bank has amongst lowest restructured
loans and has amongst highest non-PCR buffer at >200 bps. Overall, risks rewards remain attractive with stock trading at
1.5/1.3x FY23/23E ABV. Maintain Buy. Key monitorable would be the acquisition of high-yielding Portfolio or business (MFI or
Citi portfolio).
74
Axis Bank: RoAs / RoEs expansion to drive re-rating
Core PPOP has been volatile and needs to be worked upon. We see sharp moderation in credit costs
RoAs / RoEs to expand sharply to 1.5/ 15.0% (still lower than ICICI) by FY23E, driving re-rating.

75
PSU Banks: Prefer SBI and BoB
• We have done a deep comparative / segmental analysis across PSU banks in our recent report (here).
• We maintain SBI and BoB as our Top picks. We see 33-45% upside for these names. We highlight that Canara bank has
stepped-up on Core PPOP (amongst highest across PSU) and have amongst lowest SMA book. We maintain Buy on Canara
Bank.
• We are bit disappointed with amongst highest o/s RSA book at Indian bank. PNB and Union have the highest Net NPAs and
weak core earnings; thus RoAs progression is likely to be much slower for them.
SBI continues to remain the most preferred PSU Bank; Ex-SBI, we prefer BOB and Canara
PSU Comparison SBIN Indian BOB Canara PNB BOI Union
Asset Quality SBIN Indian BOB Canara PNB BOI Union
Gross Slippages (%;annualized) 0.7 4.4 3.3 4.2 5.4 1.4 4.6
Net Slippages (%;annualized) (0.5) 1.6 1.0 0.8 (0.0) (2.3) 2.2
Gross NPAs (%) 4.9 9.6 8.1 8.4 13.6 12.0 12.6
Net NPAs (%) 1.5 3.3 2.8 3.2 5.5 2.8 4.6
PCR on GNPAs (%) 70 68 67 64 63 79 67
RSA (Rs Bn) 383 226 205 193 209 231 239
RSA (%) 1.6 6.3 3.0 3.0 3.1 6.1 4.1
Total PCR on GNPAs + RSA (%) 71 49 57 54 56 59 56
Net Stress (Rs Bn) 476 304 345 353 528 301 462
% of Loans 1.9 8.4 5.0 5.4 7.8 8.0 8.0
% of Networth 17.7 71.9 42.8 55.3 55.2 56.8 66.4
Business and Capital SBIN Indian BOB Canara PNB BOI Union
Net Advances (Rs Bn) 24,432 3,604 6,938 6,496 6,732 3,787 5,810
CASA (%) 45 41 42 32 45 38 37
NIMs (%) 3.2 2.9 2.9 2.7 2.4 2.4 3.0
PPoP / Assets % (annualized)* 1.5 2.0 1.9 1.9 1.3 1.5 2.3
PPoP less treasury / Assets % (annualized)* 1.5 1.8 1.5 1.5 0.9 1.3 2.0
PPoP less treasury less recovery from TWO 1.4 1.3 1.3 1.5 0.6 1.1 1.3
CET 1 (%) 9.8 11.7 11.4 10.1 11.6 13.4 10.2

Under New Tax Regime Yes Yes Yes No No No No
Mid-small private Banks: Snapshot
• Soft business uptick across mid-small private banks, which have more impacted amidst Covid-19 led disruptions.
• Positively, Net slippages have been under control across banks and in-fact, negative for Federal and Karur Vysya Bank
• Restructured loans are relatively on the higher side and varies across banks at ~3-10%.
• Bandhan has the highest RSA at ~11%, followed by EquitasB at ~10%. Federal Bank has the lowest net stress at 3%.
• RBL bank (not covered) also seems to be factoring-in most of the negatives.
• We prefer EquitasB from medium term perspective. We also like Federal bank and KVB from risk returns perspective.
Mid-Small private banks Snapshot

Regional Banks FB CUBK DCB SIB KVB EquitasB RBL Bandhan
Slippages % (annualized) 1.0 3.2 6.2 3.8 1.3 7.6 8.7 15.8
Net Slippages % (annualized) (0.2) 1.8 0.3 1.8 (1.5) 2.0 5.3 12.5
Gross NPA % 3.2 5.6 4.7 6.7 7.4 4.8 5.4 10.8
Net NPA % 1.1 3.5 2.6 3.9 3.0 2.5 2.1 3.0
PCR % 66 39 45 44 61 50 62 74
O/s RSA (Rs Bn) 35,360 22,478 18,270 23,100 15,790 17,250 18,763 83,260
as % of Loans 2.6 6.1 6.8 4.1 3.1 9.7 3.4 11.2
Total Stress (GNPA + O/s RSA; Rs Bn) 79,818 43,671 31,119 61,896 55,506 26,058 50,072 170,896
% of Loans 5.9 11.8 11.6 10.9 10.8 14.6 8.9 22.9
% of Networth 45 71 81 110 77 75 41 117
PCR (%) on GNPAs 66 39 45 44 61 50 62 74

Total PCR (%) on GNPAs + RSA 50 29 33 35 51 29 52 56
Net Stress (Rs Bn) 39,836 31,214 20,830 40,025 27,313 18,444 24,187 75,696
% of Loans 3.0 8.4 7.8 7.1 5.3 10.3 4.3 10.2
% of Networth 22 51 54 71 38 53 20 52
77
RBL Bank (Not covered)
• RBL bank is mid-size bank but NOT SME / Commercial Better than peer performance in MFI segment
bank.
• The bank has strong niche in high yielding Credit card

(22% of loans) and MFI loans (9% of loans).
• Stock had multiple head-winds in the last few years

leading to sharp multiple de-rating.
• Corporate Asset Quality has stabilized.
• Liability franchise has been improving.

• Capital adequacy is strong with Tier 1 at >16%.
RBL has shown the most restraint in MFI lending during Covid; AQ performance relatively better
78
RBL Bank (Not covered)
RBL Bank: Arguably better performance on Credit card vs SBI Cards

RBL vs SBIC - Credit Card Comparison
O/s CIF (Mn) 1QFY21 2QFY21 3QFY21 4QFY21 1QFY22 2QFY22
RBL 2.6 2.7 2.8 3.0 3.1 3.1
SBIC 10.6 11.0 11.5 11.8 12.0 12.6
GNPAs (%) 1QFY21 2QFY21 3QFY21 4QFY21 1QFY22 2QFY22
RBL (Credit Card)* 0.2 0.4 5.7 5.8 4.3 4.6
SBIC 1.4 4.3 1.6 5.0 3.9 3.4
NNPAs (%) 1QFY21 2QFY21 3QFY21 4QFY21 1QFY22 2QFY22
RBL (Credit Card)* - 0.1 2.3 2.1 1.1 1.9
SBIC 0.4 1.5 0.6 1.2 0.9 0.9
RSA (%) 1QFY21 2QFY21 3QFY21 4QFY21 1QFY22 2QFY22
RBL (Credit Card) 2.3 1.5 1.1
SBIC 9.0 9.9 8.1 6.0 4.1
Gross Stress % (GNPAs + RSA) 1QFY21 2QFY21 3QFY21 4QFY21 1QFY22 2QFY22
RBL (Credit Card) 8.0 5.8 5.7
SBIC 13.3 11.5 13.1 9.9 7.4
Credit Costs % 1QFY21 2QFY21 3QFY21 4QFY21 1QFY22 2QFY22
RBL* 2.1 2.5 2.4 5.1 10.3 4.2
SBIC 8.2 14.6 10.4 11.1 10.4 9.3
Source: Company Data, B&K Research. *Note- RBL 2QFY21 and 3QFY21 asset quality figures are pro-forma basis. RBL Credit Costs figures are net retail credit
costs.
RBL bank: Segmental Asset Quality details

Annexure – Sectoral Credit
Sector (Rs Bn) Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21
Gross Bank Credit (Food + Non Food Credit) 92,631 91,360 91,835 93,414 109,516 108,604 108,336 108,419 109,104 108,975 109,568 110,463
Food Credit 516 890 662 928 613 583 907 869 775 688 623 637
Non-food Credit (1 to 4) 92,115 90,470 91,173 92,485 108,903 108,021 107,429 107,550 108,329 108,287 108,945 109,826
1. Agriculture & Allied Activities 11,578 11,529 11,945 12,457 12,710 12,913 12,848 12,844 13,180 13,043 13,213 13,440
2. Industry (Micro & Small, Medium and Large ) 29,052 28,752 27,749 27,602 28,958 28,959 28,838 28,673 28,249 28,196 28,295 28,546
Micro & Small 3,818 3,527 3,608 3,700 3,839 3,721 3,707 3,751 3,861 3,901 3,954 4,043
Medium 1,056 957 1,202 1,236 1,361 1,431 1,455 1,479 1,634 1,702 1,751 1,799
Large 24,177 24,268 22,938 22,667 23,759 23,808 23,675 23,443 22,754 22,593 22,590 22,704
3. Services 25,949 25,285 25,763 25,792 26,474 25,923 25,711 26,006 25,977 26,253 25,716 26,039
Transport Operators 1,445 1,467 1,476 1,550 1,340 1,440 1,423 1,412 1,324 1,318 1,312 1,311
Tourism, Hotels & Restaurants 460 463 484 512 480 504 495 496 484 486 489 487
Professional Services 1,771 1,739 1,755 1,285 1,053 1,143 1,131 1,121 972 999 995 1,008
Trade 5,524 5,430 5,663 5,895 5,904 6,092 6,145 6,143 5,944 5,917 5,766 5,955
Commercial Real Estate 2,298 2,293 2,300 2,309 2,642 2,349 2,337 2,323 2,627 2,583 2,558 2,536
Non-Banking Financial Companies (NBFCs) 8,074 7,985 8,026 7,900 9,379 9,238 8,995 8,839 8,922 8,705 8,768 8,836
Other Services 6,113 5,651 5,810 6,077 5,412 4,894 4,931 5,394 5,442 5,989 5,568 5,640
4. Personal Loans 25,537 24,904 25,717 26,634 28,455 28,104 27,873 27,865 28,587 28,939 29,185 29,556
Consumer Durables 93 88 67 71 88 73 70 71 95 103 109 116
Housing (Including Priority Sector Housing) 13,390 13,359 13,598 13,935 14,584 14,615 14,620 14,646 14,668 14,697 14,785 14,852
Credit Card Outstanding 1,081 976 1,056 1,104 1,165 1,136 1,045 1,028 1,113 1,156 1,156 1,233
Vehicle Loans 2,206 2,146 2,214 2,302 2,674 2,424 2,402 2,382 2,660 2,686 2,704 2,726
Other Personal Loans 7,261 7,012 7,436 7,874 8,631 8,476 8,397 8,408 8,790 9,012 9,116 9,309
YoY Growth (in % ) Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21
Gross Bank Credit (Food + Non Food Credit) 6.8 6.9 5.8 5.9 18.2 18.7 18.9 18.7 19.3 19.6 19.3 19.9
Food Credit 24.4 25.0 10.5 9.4 18.7 11.2 14.6 -2.3 -2.0 4.7 -5.8 -4.1
Non-food Credit (1 to 4) 6.7 6.7 5.8 5.9 18.2 18.7 19.0 18.9 19.4 19.7 19.5 20.1
1. Agriculture & Allied Activities 4.2 2.4 5.9 9.4 9.8 12.2 12.1 11.4 12.7 11.7 10.6 10.3
2. Industry (Micro & Small, Medium and Large ) 0.7 2.2 0.0 -1.2 -0.3 0.4 0.8 -0.3 0.1 1.5 2.0 4.2
Micro & Small 1.7 -3.7 -0.1 1.2 0.5 3.8 5.0 6.4 8.8 10.0 9.6 11.8
Medium -0.7 -9.0 14.5 15.3 28.8 43.8 45.8 54.6 60.2 58.5 45.6 46.1
Large 0.6 3.7 -0.6 -2.4 -1.7 -1.9 -1.7 -3.4 -3.8 -2.5 -1.5 0.7
3. Services 7.4 10.7 9.1 8.8 2.0 0.7 1.1 2.9 2.0 2.9 -0.2 1.1
Transport Operators 4.3 3.5 3.5 10.4 -7.3 -3.2 -4.7 -3.8 -11.0 -11.3 -11.1 -11.5
Tourism, Hotels & Restaurants 17.9 16.8 19.7 14.5 4.4 9.9 8.2 7.3 2.1 2.7 1.0 0.2
Professional Services 3.2 3.1 2.2 -25.6 -40.6 -34.0 -34.8 -35.5 -45.0 -43.0 -43.3 -43.4
Trade 4.6 6.1 11.5 14.7 6.9 11.7 14.1 13.1 6.0 4.3 1.8 3.4
Commercial Real Estate 13.6 11.6 5.5 5.1 15.0 2.2 2.6 1.3 12.6 11.9 11.2 11.2
Non-Banking Financial Companies (NBFCs) 25.9 25.7 12.5 8.4 16.2 13.7 11.8 10.7 12.4 9.3 9.3 13.5
Other Services -8.6 1.2 7.0 15.6 -11.5 -17.3 -14.8 -4.5 -2.9 6.9 -4.2 -5.1
4. Personal Loans 15.0 10.5 9.2 9.5 11.4 12.8 12.4 11.9 12.9 13.6 13.5 13.2
Consumer Durables 47.6 53.3 22.3 30.1 -5.2 -18.4 -19.0 -19.8 4.4 13.3 63.7 69.0
Housing (Including Priority Sector Housing) 15.4 12.5 8.5 8.1 8.9 9.8 10.0 9.6 8.8 8.9 8.7 8.2
Credit Card Outstanding 22.5 2.8 7.1 4.2 7.8 17.1 12.5 5.3 9.8 10.3 9.5 11.9
Vehicle Loans 9.1 7.1 8.8 7.8 21.2 11.7 11.9 11.0 22.2 22.2 22.1 21.7
Other Personal Loans 19.7 12.1 13.2 15.4 18.9 21.2 19.9 19.9 21.8 23.2 22.6 21.9
80
Annexure: Interest rate – Banks are now de-leveraged
• Hardening Interest rates have acted as headwinds for
stock performance historically due to huge AFS share and
Banks have much lower duration and AFS share
duration.
• We believe the co-relation is more like a step-up function.,

wherein interest rates above a certain threshold start
hurting. As present, we are still much below that threshold,
in our view.
• Our house view is G-Sec at 6.4/6.85/6.9 for FY22/23/24.
• Also, banks have de-leveraged themselves on Interest

rates. AFS for select banks is <1% while AFS share is also
limited.
• Overall, we do not see any substantial adverse impact. Source: B&K Research
Interest rates have negative co-relation with Stock performance and +ve co-relation with NIMs

81
Annexure – Loan Mix
Loan Mix (%) Axis HDFCB ICICIBC IIB KMB SBIN RBL FB CUBK DCBB
Overseas 6.8 2.8 5.4 - - 14.8 - - - -
Domestic 93.2 97.2 94.6 100.0 100.0 85.2 100.0 100.0 100.0 100.0
Corporates 27.6 23.0 23.7 22.8 27.6 29.9 34.6 35.6 9.6 11.0
SME 10.0 34.3 4.6 22.0 7.7 11.1 10.4 10.1 51.9 10.0
BuB 3.4 - 6.2 5.0 9.8 - 3.0 9.1 - -
Agri 6.6 - 9.9 - 13.9 8.5 2.2 13.0 15.7 22.0
Retail 45.6 39.9 50.2 50.1 40.9 35.7 49.8 32.2 22.7 57.0
o/w Home Loan 20.8 6.3 26.1 - 26.2 20.5 - 15.2 5.3 20.5
o/w LAP 5.9 4.5 10.7 4.0 NA - 16.4 5.8 - 20.5
o/w Mortgage 26.7 10.8 36.7 4.0 26.2 20.5 16.4 21.0 5.3 41.0
o/w PL 6.5 10.4 7.3 - 3.1 8.3 - 1.3 2.4 -
o/w CC 2.3 5.6 2.8 2.3 1.9 - 22.3 - - -
o/w Unsecured 8.7 16.0 10.1 2.3 4.9 8.3 22.3 1.3 2.4 -
o/w Auto 6.6 8.7 5.4 16.6 - 2.9 - 2.8 - -
o/w CV - - 3.4 10.2 8.3 - - - - 4.0
o/w MFI / AIB - - - 12.7 - - 10.8 - - -
o/w Retail-Others 3.7 4.4 - 5.4 4.3 1.5 4.0 0.2 7.2 15.0 12.0
Loan Book (Rs Bn) 6,217 12,104 7,204 2,208 2,350 25,308 560 1,373 380 269
Source: Company Data, B&K Research. Pls note that we have done some standardization for select banks in the above data. HDFCB has done re-grouping
of loan book in 2QFY22.
82
Annexure: SREI – Bank wise details; RBI tightens NPAs
norms
SREI and Vodafone SREI Exposure and PCR
• SREI has been recognized as NPA during 2QFY22 as court
Rs Bn SREI Exposure Provisions PCR (%)
stay was vacated.
• SBI and IDBI have made as high as 100% PCR here. Ex-SBI, SBI 27 27 100
other banks have made 40-65% PCR.
BOB 20 10 50
• No major chronic corporate case in Watch-list /
Restructured now. Vodafone stress also seems PNB 28 11 40
incrementally better
RBI tightens its norms on NPAs norms
Union 26 17 65
• RBI had mandated daily NPA tagging for all loans wef Indian 18 9 50
June 2021. This led to some spike in slippages and also
higher recovery in 1HFY22 across banks including Private Canara 32 16 50
banks.
• RBI has now mandated daily tagging of SMA loans. Some

BOI 10 5 50
impact on Term loans SMA / NPAs is possible. .
Central 11 6 50
• No clarifications on inter-quarter netting off slippages yet.
• No upgrade without the repayment of full overdues. Most IDBI 3 3 100

of the banks were anyway following this so impact is on Source: Company Data, B&K Research
NBFCs mainly.
83
Annexure: Digital Banking - Current landscape
• Overall digital disbursements across lenders have grown Digital disbursements is still nascent though
>12x over FY17-20 period to Rs 1.4 trillion. rising
• Private banks have 55% market share in overall digital
disbursements followed by NBFCs (30%) and PSBs (13%).
• Within Banks, the digital lending is still at a nascent stage

and accounts for just ~2% of the total disbursement by
value and 6% by volume.
• From value perspective, Personal loans remain the largest

product within digital though BNPL has emerged as No1
product by volume.
Private banks saw 100% CAGR in digital disbursements and have highest market share at 55%

Thank You
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Banks - Sector Update - 22 Dec 21

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SECTOR UPDATE

Jai Mundhra Suraj Das Trimukh Phene

Public Sector Banks

Banking stocks have underperformed in the last 1 month and 3 months.

RoAs (%) vs P/ABV (x) – FY23

Source: Company Data, B&K Research

Large banks trading at attractive valuations vs their trading history

Source: B&K Research

Theme 2: Loan Growth has already bottomed-

Theme 3: Digital transformation underway but

04 Banks’ Pecking Order and Top Picks

Systemic GNPAs / NNPAs have continued their improvement trjectory

Source: Company Data, B&K Research

Source: Company Data, B&K Research

• With SREI recognition in 2QFY22, Large corporate Asset

• Net NPAs for private banks as of 2FY22 at 1.3% is decisively

• Kotak / IIB stand-out as NNPAs are above pre-Covid.

• PSU Net NPAs are now 4.0% vs 4.7% Pre-Covid. Aggregate

Source: Company Data, B&K Research

Source: Company Data, B&K Research 12

• Unlike wave 1, the restructuring was also bulky in wave 2.

Source: Company Data, B&K Research

PSU banks – Segmental stress

• RSA at IndusInd bank are bulky at 3.6% due to higher share

• Among mid-small private banks, Bandhan has the

• We calculate that overall RSA at system level is at 2.6%,

Source: B&K Research

Source: Company Data, B&K Research

• Kotak ECLGs portfolio has been relatively stable QoQ at

• Select banks, such as Kotak, have commented that ECLGS

• EquitasB continues to have NIL ECLGS.

• ECLGS book would be fully tested in 3QFY22 onwards.

Source: B&K Research

Source: Company Data, B&K Research

ECLGS Sectoral distribution High availed rate for medium SMEs

Source: Transunion CIBIL, B&K Research

~2% NPAs and ~10% in SMA in ECLGS

Performance of ECLGS and Non-ECLGS borrowers

Source: MSME Pulse

Risk transition matrices for ECLGS and Non-ECLGS SME

Source: MSME Pulse

• However, retail slippages have seen healthy upgrades

• Stress persists in Unsecured / MFI / CV though Unsecured /

• We see Retail asset quality to improve going ahead.

BSE 500 chart

All banks – Net stress as % of NW

All banks – Net stress as % of loans

ICICIBC 6.7 33 94 0.8 2.0 6.3 31 0.4 2

Theme 2: Loan Growth has already bottomed-out;

Theme 3: Digital transformation underway but

04 Banks’ Pecking Order and Top Picks

Systemic credit growth has bottomed-out. Industry growth is ~2 years high!!

Source: B&K Research

Source: RBI, B&K Research

Source: B&K Research

Rising appetite for Unsecured retail.

Source: B&K Research Source: B&K Research 26

• We see credit growth to move from 6-7% YoY now to 12-

• As of now, SBI has 23 m/s and we expect stable m/s. Non-

Source: B&K Research

Source: B&K Research 27

Source: Company Data, B&K Research

Source: Company Data, B&K Research 29

• Large banks continue to see 15-20% YoY growth in retail