India bank equity index (BANKEX) has fallen by over 20% from its peak. The main concerns to banks are Telecom exposure, Real Estate and MicroFinance. Bribery was a one-off case.
For the Telecom Sector, analysts estimate banks’ exposure to Telecom loans ranges from 2-6% of loans, with ICICI at <2%. SBI falls in the mid-range at
around +3% with Axis at the higher end at +6% of loans.
For Microfinance, the exposure for most banks to this space is <1% of book, which should limit the overall earnings impact.
Assuming a) 10% of the telecom loans, b) 5% of real estate loans and c) 10% of MFI loans were to go bad, it appears that HDFC Bank would be the least impacted and Axis most, should this scenario unfold. Most of the state-owned banks would fall somewhere in between, with an estimated 4-6% hit on the Net Worth.
