Two out of America’s top 25 banks have collapsed. Turbulence across the global financial markets has made us think if we are teetering on the edge of another financial crisis, 2008-style. Shares of Credit Suisse plunged on March 14 after material weaknesses were found in its financial reporting. Thereafter, its rival UBS took over the beleaguered firm. Meanwhile, worries over Deutsche Bank are mounting. 

The Silicon Valley Bank was shuttered by California regulators on March 10. It is called the biggest U.S Bank collapse since the global financial crisis in 2008. 

Coming to Indian banks, Emkay Global said that March quarter results are likely to be strong for banks. The brokerage is constructive on the sector even as it expects some moderation in credit growth post-fourth quarter. It prefers ICICI Bank, Axis Bank, Bank of Baroda (BoB), SBI, Federal Bank, Karur Vysya Bank and Indian Bank among Banking stocks. 

It said that domestic banks have their balance sheets funded mainly with granular retail deposits (unlike global banks). They have better asset liability management (ALM) and are under continuous monitoring/have support from stringent regulators like the RBI, thus reducing the risk of any sudden liquidity crisis, as seen in US-based SVB. It added that the Reserve Bank of India has a good record of proactively managing banking failures in India. 

They said that according to their discussion with bankers, counterparty risk from US/Europe bank failures or AT1 w-offs remains lower for the Indian banking system, but could lead to an increase in risk premia on bonds and thus borrowing rates. 

Emkay Global said that Indian banks remain resilient. The Adani crisis caused a correction in banking stocks, however, the global financial crisis has extended the correction. The brokerage believes that Indian banks remain resilient in terms of liquidity, investment book, growth and asset quality compared with their global counterparts. 

While analysts said that the government’s decision to take away indexation benefits from Debt mutual funds have made FDs attractive, Emkay Global thinks that it will not materially reduce competition, given lower retail participation. 

ICICI Bank 

Emkay Global has a buy call on the shares of ICICI Bank with a target price of ₹ 1250, which translates to an upside of 45.87% as compared to its current share price of ₹ 856.90 apiece. 

Axis Bank 

Emkay Global has a buy call on the shares of Axis Bank with a target price of ₹ 1250, which indicates an upside of 49.94% as compared to its current share price of ₹ 833.65 apiece. 

Indian Bank

Emkay Global has a buy call on the shares of Indian Bank with a target price of ₹ 375, which represents an upside of 34.63% as compared to its current share price of ₹ 278.55 apiece. 

Written by Simran Bafna 

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