Second wave of NPAs? SBI, BoB, YES Bank could be hit, says Jefferies

YES Bank, Bank of Baroda, SBI, IndusInd Bank, and RBL Bank are amongst the banks most prune to “high risk” emanating from Anil Dhirubhai Ambani Group (ADAG), Cox & Kings, CG Power, and DHFL

Bank of Baroda (BoB), Axis Bank, ICICI Bank, and State Bank of India (SBI) could be staring at another wave of non-performing assets (NPAs), especially in the telecom and construction sector, as there appears to be a divergence between the credit rating assigned and the financial health of the corresponding corporate entity, says the latest sector report by Jefferies.

In a note on Indian banks and financial institutions co-authored by Nilanjan Karfa and Harshit Toshniwal, Jefferies suggests there is a potential “meaningful divergence” between the ratings and the debt repayment ability. YES Bank, Bank of Baroda, SBI, IndusInd Bank, and RBL Bank are amongst the banks, Jefferies says, that are most prone to “high risk” emanating from Anil Dhirubhai Ambani Group (ADAG), Cox & Kings, CG Power, DHFL and Essar Shipping.

Given the elevated debt serviceability ratio (the higher the ratio the poorer the ability to sustain debt levels), the ‘A’ rated corporate are the most prone to further credit rating downgrades. The report, however, points out that debt or interest repayment abilities of ‘BBB’ and below rated companies have seen an improvement….