• CY20 has started on a distinctive note with credit growth slumping to 7.1% YoY (lowest in the past 2 years), driving a sharp rise in systemic liquidity (~INR4t).

• The recent SC judgment on Essar Steel should give fresh impetus to the resolution of struck NCLT cases and enable banks to report significant write-backs.

• The year is crucial as two banking stalwarts will hang up their boots after building formidable franchisees.

• After reporting sub-optimal performance over the last few years, large lenders are set to recover and report strong profit growth over FY19-22, led by normalization in credit cost, steady margins and healthy loan growth.

• This is expected to drive further re-rating of these stocks. ICICIBC and SBIN remain are top banking ideas.

• Amongst mid-sized banks, AUBANK and Federal Bank should do well given their healthy business growth and in-place drivers for RoA expansion.

Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.

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