Valuation improving for banks as Covid impact eases out: Report

MUMBAI: Indian banks, that were under a lot of pressure following the impact of Covid lockdown, have recovered strongly in the last couple of months.

Most of the banks have seen a revival in their valuations and fee income even as their non-performing assets remain under control, a report by DART said.

“In line with the positive note from lenders and improving high frequency data, we have seen strong catch up in valuations across banks, more so large private sector banks. However, while activity is inching closer to pre-COVID levels, it is important to note that it still remains in a contraction mode. And risk/impact of a second COVID wave remains a grey area. Even at current levels, we see value in SBI due to improving operating metrics, limited asset side risks in large corporate and retail portfolios, and strong valuation comfort. Concerns over any possible mergers are also behind the bank now,” the report said.


Most banks were put under additional stress on their books after they had to extend moratoriums to their lenders. Apart from that, many banks have been stuck with situations where they did not know what to do with certain consumers as the road to IBC no longer remains an option following the government regulations.

The report said that while the valuations of banks seem to be inching towards the pre-Covid levels witnessed in March this year, there is some reason to be cautious still. “While activity is inching closer to pre-COVID levels, it is important to note that it still remains in a contraction mode. And risk/impact of a second COVID wave remains a grey area."