- Regional banks in the United States account for 2-3% of their revenue, JP Morgan said in a note
Top Indian information technology firms Tata Consultancy Services and Infosys have the highest exposure to regional banks in the United States that are gripped by a financial turmoil, analysts at J.P.Morgan said on Friday.
Regional banks in the United States account for 2-3% of their revenue, J.P. Morgan said in a note, adding that the exposure to the recently collapsed Silicon Valley Bank could be 10-20 basis points for TCS, Infosys and smaller rival LTIMindtree, with the Tata group company in the lead.
All three companies might need to set aside provisions in the fourth quarter due to their exposure to SVB, J.P. Morgan said in a note.
“The collapse of SVB, Signature Bank and concerns of liquidity across U.S. and the European Union can further soften tech spends by banks over the short term in a year with slowing growth in bank tech budgets,” J.P. Morgan, which has an “underweight” rating on the sector, said.
India’s IT industry is already facing a challenging macroeconomic environment in its key markets of Europe and the United States, where technology spending is contracting amid delays in decision-making on long-term deals as the pandemic-led surge in demand faded.
The banking crisis could delay deal ramp-ups, impacting revenue conversions over the next two quarters, and push back new order closures that could hurt revenue over the next four quarters, J.P. Morgan said.
Indian IT firms draw the bulk of their revenue from the banking, financial services and insurance (BFSI) sector.
Within BFSI, their exposure to the U.S. banks is on average 62% and Europe 23%, J.P. Morgan said.
LTIMindtree this week said it had negligible exposure to U.S. regional banks, including SVB.
Get the best recommendations on Stocks, Mutual Funds and more based on your Risk profile!
Download the Mint app and read premium stories
Log in to our website to save your bookmarks. It’ll just take a moment.
You are just one step away from creating your watchlist!
Oops! Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image.
Your session has expired, please login again.
You are now subscribed to our newsletters. In case you can’t find any email from our side, please check the spam folder.
This is a subscriber only feature Subscribe Now to get daily updates on WhatsApp