As Kerala floods wreak havoc, these 5 bank and NBFC stocks are likely to be impacted the most

Moneycontrol News

Life has come to a standstill in Kerala with flood and landslides leading to unforeseen miseries and chaos. The natural calamity is likely to impact companies which are based in the state or have some business exposure there, suggest experts.

Torrential rains, overflowing rivers and a series of landslides have resulted in the death of over 300 people in the state during this monsoon season. Over 1.67 lakh people are rehabilitated in 1,165 relief camps are functioning in the state, Emkay Global said in a report.

And the numbers have been on the rise.

This is a catastrophic event has impacted lives, homes, businesses and even agriculture activities within the state. The rub-off effect of the same is expected to be felt on some banks and NBFCs that have a sizeable exposure in the state, it said.

The main impact could be in the form of accretion in fresh slippages and the rise in credit costs (especially for SME/MSME/retail) along with weakening credit growth profile.

Emkay Global lists out five such stocks which are likely to get impacted the most from Kerala floods:

Federal Bank remains at the major risk due to this unforeseen event with 34 percent of lending and 64 percent of deposits directly linked to the state.

62 percent of Kerala-based deposits are contributed by the bank’s NRI customer base. Out of total Kerala-based lending book, 51 percent is to corporate, 28 percent towards SME/MSME and 21 percent to the retail segment.

Emkay expects that rising risk of default in all these segments could see a potential delay in recoveries along with a spike in credit costs.

South Indian Bank is yet another Kerala-based bank with total lending exposure of 41 percent to the state. Of this Kerala-based lending, 42 percent of exposure is towards SME/MSME which remains at higher risk.

For Muthoot Finance, specific exposure to the state is undisclosed. However, 15 percent of branch network for Muthoot Finance is in Kerala with 50 percent of the lending book contributed by Southern states.

For Manappuram Finance, 15 percent of the Gold Loan branches and 7 percent of MFI branches are located in Kerala. Also, on a blended basis, 52 percent of the total lending book is contributed by Southern states.

Among large banks, State Bank of India (SBI) would have considerable exposure given that one of the merged associate banks, State Bank of Travancore (SBT), originated from the state with significant exposure to direct agriculture and related sectors.

Among private banks, we would remain relatively concerned towards HDFC Bank, considering their healthy Agri exposure