Morgan Stanley Downgrades Bank of Baroda and ICICI Bank

Indian banks are unlikely to see a slowdown in bad debt formation this fiscal as they will continue to be impacted by a weak economy, a struggling corporate sector, and the Reserve Bank of India's intention to clean bank balance sheets, Morgan Stanley has said

The US investment bank on Monday downgraded private sector ICICI Bank and public sector Bank of Baroda (BoB) to so-called equal weight because of expectations that these banks will have to provide more money to cover for non-performing assets (NPAs) in the current and next fiscal year.
 

Equal weight means investors should detest from accumulating these stocks, but may hold on to their existing investment.
 

Morgan Stanley said it prefers lenders with a high retail base, but among banks with a corporate focus Yes Bank and Axis Bank are better off because of a minimum impact from RBI's asset quality review (AQR), in which banks were directed to recognise some standard loans as bad. 

 

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