A man walks past the HDFC Bank stall at the Global FinTech Fest in Mumbai, India on September 6, 2023.
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Shares of India’s largest private financial company HDFC Bankalong with those of axis bankfell nearly 5% on Monday as concerns grew over weak net interest margins.
HDFC’s NIM decreased by 13 basis points from the previous quarter to 3.4% from 3.53% in the previous quarter. Axis Bank’s NIM was 3.46% in the April-June quarter, down 16 basis points from a quarter earlier.
Citigroup said in a report on Sunday that “NIM compression due to fee mitigation” added to the “earnings headwinds”, adding that NIM remains a “key monitorable factor” going forward.
HDFC Bank’s stock price has been under pressure since March following the resignation of Atanu Chakraborty, the bank’s non-executive chairman, raising governance and ethical concerns within the bank.
The bank announced in June that an independent legal review found no evidence to support the concerns raised in Chakraborty’s resignation letter.
The global brokerage also noted that lending momentum from the Mumbai-based lender is improving, mainly driven by demand from the commercial and corporate sectors.
“Retail (loan) traction remains underwhelming,” the report said.
Meanwhile, Indian brokerage Motilal Oswal said in a report on Monday that the sharp compression in Axis Bank’s NIM was mainly due to the impact of loan repricing.
Axis also added that loan growth also improved, driven by demand from the corporate sector, while the consumer sector remained weak.
The brokerage has lowered Axis Bank’s profit forecast for the fiscal year ending March 2027 and the next financial year by 2%.
