Why are banks weak when bank credit growth is back in double digits?

General
1

creditgrowth

Pic credit : IndiaDataHub

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creditgrowth2718×331 17.9 KB

Pic credit : tradingeconomics

Some points worth noting

  • Banks are expected to see double digit growth in 22-23 after almost 3 years. Sounds like good news to us ryt?

  • Its also kind of interesting to note that credit growth is now more than deposit growth as we can see in the above image which indicates that the money is flowing to the productive sectors in the economy.

  • When there was massive NPA crisis before, banks had weathered that storm extremely well and added to that there was massive corporate deleveraging which stabilised the situation even further.

  • With a new credit growth cycle about to begin wherein we may see credit growth in double digits for a reasonable period of time - Assuming the markets are forward looking, banks should have done well. But, are currently under-performing.

What can be the reason for this underperformance of banking sector when the worst that the banks have seen is already (the famous SBI dialogue :stuck_out_tongue: ) behind them and we are at the cusp of a fresh credit growth cycle?

2

Fully agree with you. The main reason for the weakness is due to FII selling. Generally FII focus on top notch private banks and IT companies and when they start selling the collateral damage are these banks and IT companies

Disc: These are my views only and I could be wrong.

3

Hello
I checked the chart of SBI it is not weak. FIIs are selling private banks and they appear weak.
Then there are RBL and PNB and YesBank such which should definitely be weak :slight_smile: