Over last few weeks, we have seen a serious pop in Bank shares. An SBI has shot up to 240+ levels, from below 180 not too long ago. And same with ICICI and others.
Our banks have benefitted from the loan moratorium - because there was no deterioration of credit since March. This meant, they could turn a blind eye to the real problems in the economy, and declare some hefty profits. Also, they have played their usual game - of not passing on rate cuts fully to borrowers, which created a semblance of profitability.
However, there are still serious questions about the economy. Many people have lost jobs or have had salary cuts - and now that the moratorium is over, it will soon be evident what will be the impact on the banking system.
Frankly, it is simply inconceivable that we have such dramatic impact to the economy, and banking system remains unscathed!
My sense is that banks will be impacted going forward and share prices will give up some of their recent gains.
Our banks have benefitted from the loan moratorium - because there was no deterioration of credit since March. This meant, they could turn a blind eye to the real problems in the economy, and declare some hefty profits. Also, they have played their usual game - of not passing on rate cuts fully to borrowers, which created a semblance of profitability.
However, there are still serious questions about the economy. Many people have lost jobs or have had salary cuts - and now that the moratorium is over, it will soon be evident what will be the impact on the banking system.
Frankly, it is simply inconceivable that we have such dramatic impact to the economy, and banking system remains unscathed!
My sense is that banks will be impacted going forward and share prices will give up some of their recent gains.