Credit Suisse is more relevant to India's financial system than SVB: Jefferies
1 min read 16 Mar 2023, 12:24 PM ISTCredit Suisse's India connection is more relevant than Silicon Valley Bank (SVB), but not disruptive, as per Jefferies
PremiumCredit Suisse Group AG is more relevant to India's financial system than Silicon Valley Bank (SVB), according to Jefferies who sees that the fate of the European lender is of greater importance to the Indian banking sector than the collapse of SVB.
“Given the relevance of Credit Suisse to India's banking sector, we see softer adjustments in assessment of counter-party risks, especially in the derivative market. We expect Reserve Bank of India (RBI) to keep close watch on liquidity issues, counter-party exposures and intervene as necessary. This may also lead to institutional deposits moving more towards larger/ quality banks," the note stated.
Credit Suisse's bank has ₹200 bn in assets (12th among foreign banks), presence in derivatives market and funded 60% of assets from borrowings, of which 96% is up to 2 months. Still, its small for banking sector with 0.1% share of assets, the note highlighted.
Foreign banks have a relatively smaller presence in India with 6% share in total assets, 4% in loans and 5% in deposits. They are more active in the derivative markets (forex and interest rates) where they have 50% share.
Most of them are present as branches of the parent bank with only a few present as a wholly-owned subsidiary. “Nevertheless, they retain capital, liquidity and make similar annual report disclosures as Indian banks. Top-5 foreign banks in India by assets are HSBC, Citibank (has now sold consumer business to Axis), Standard Chartered, Deutsche Bank and JP Morgan."
“We watch out for liquidity issues and any rub-off on counter-party risk assessment (esp. in derivatives) & deposit market may move towards larger/ quality banks," analysts at Jefferies said.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
