Global financial services firm Morgan Stanley believes Calendar 2020 will be similar to last year, with larger banks gaining more market shares.Struggling lenders will continue to be weak due to asset quality issues, it said.
On Friday, the foreign brokerage slashed the target price for YES Bank to Rs 25.
We remain underweight on YES Bank given the delay in capital raising and elevated asset quality stress, Morgan Stanley said.The scrip traded nearly 1 per cent up at Rs 47.75 at around 10.10 am (IST).
The private lender's board is meeting later on Friday to weigh options for fund raising.In the base case scenario, Morgan Stanley has assumed a capital raising of $2.1 billion at Rs 60.
We estimated impaired loans to rise to around 30 per cent of total loans, and provision requirement of 70 per cent on that.
Further we target a Common Equity Tier 1 (CET1) ratio of around 10 per cent, it said.However, given the fall in stock price and delay in capital raising, it has changed the price assumption for capital raising scenarios.
We have now built in capital raising at Rs 45 in a base case scenario, Rs 15 in a bear case scenario and Rs 55 in bull case scenario, Morgan Stanley said.The brokerage also remained underweight on RBL Bank and IDFC Bank with price targets of Rs 240 and Rs 24, respectively.On the other hand, it turned overweight on ICICI Bank, HDFC Bank, Kotak Mahindra Bank and IndusInd Bank with price targets of Rs 775, Rs 1,700, Rs 1,925 and Rs 1,800, respectively.Morgan Stanley also said mid-sized banks would continue to struggle given higher non-performing loans (NPL).