Written by Harshita Swaminathan, Rachel Yeoh, Rena Sasaki, Justina T. Lee
(Bloomberg) — Rising credit costs for Indian banks and their struggle to attract customer deposits to alleviate them remain at the center of discussion as HDFC Bank and Kotak Mahindra Bank report results on Saturday. It will be.
Indian banks have traditionally used customer deposits to fund lending operations, but deposits have dried up in recent quarters as Indians increasingly put their money in equity funds rather than savings or fixed deposits. are. Analysts at Jefferies said financial institutions have slowed lending growth, particularly in the retail sector, reflecting India’s central bank’s concerns about unsecured lending and the need to lower loan-to-deposit ratios.
HDFC Bank, which has a particularly high loan-to-deposit ratio, announced in an update before announcing its financial results earlier this month that it had managed to increase deposits by 5.1% quarter-on-quarter. Net profit is still expected to increase by 1.9% as the company continues to strive to keep its loan-to-deposit ratio within central bank standards.
Markets are also divided on whether to cut interest rates in December after inflation accelerated faster than expected last month. With interest rates high, banks also face higher credit costs due to delays in the repricing of deposits, which will worsen once interest rates begin to cut.
Meanwhile, Hong Kong Exchange Clearing Ltd. may post higher profits due to improved prospects for initial public offerings and a rise in the stock market due to China’s economic stimulus measures.
Highlights to note:
Saturday: HDFC Bank (HDFCB IN) and Kotak Mahindra Bank (KMB IN)’s second-quarter profits are expected to rise by 1.9% and 7.3%, respectively. While HDFC Bank strengthens deposits, net profit growth is expected to lag behind peers of similar size. As a result, it has a lower valuation than ICICI Bank and Kotak Mahindra when measured by price-to-book value. Kotak Mahindra remains prohibited from acquiring new customers digitally or issuing new credit cards. Analysts at Bloomberg Intelligence said this increased compliance and technology costs, likely hurting profits.
Tuesday: Bajaj Finance (BAF IN)’s second-quarter net profit is expected to rise 16%, supported by higher net interest income, estimates show. The shadow lender’s second quarter update raised concerns about falling interest margins. Citi said Bajaj Finance’s net interest margin may decline by 14 basis points on a quarter-on-quarter basis due to higher funding costs.
Wednesday: HKEX (388 HK) could see six-fold increase in IPO capital and Hong Kong’s average daily price turnover recovered during the quarter, BI said. Consensus is for third-quarter earnings to rise 5.4%, driven by revenue from spot equities, commodities and derivatives.
Hindustan Unilever’s (HUVR IN) second-quarter sales are likely to rise faster than the first quarter, benefiting from a recovery in rural demand, analysts at PL Capital and Motilal Oswal say. forecasts growth of 5%. Still, higher prices for palm oil, cocoa and coffee are likely to weigh on margins, with consensus forecasts for a 1.3% decline in profits. Nidec (6594 JP)’s second quarter operating profit is expected to increase slightly. Automotive profit, excluding one-time charges, increased sequentially, likely due to improved margins in electric vehicle motor systems. Operating profit in the small precision motor business is likely to increase, driven by hard disk drive motors and artificial intelligence server cooling systems, BI said. The company is expected to maintain its 2025 operating profit target of 240 billion yen ($1.6 billion).
Thursday: SK Hynix (000660 KS)’s third-quarter operating profit is expected to be 6.91 trillion won ($5 billion), up from a loss of 1.79 trillion won in the same period last year, consensus showed. has been done. BI said the improvement in average selling prices will meet expectations. While the company’s dominant market share in high-bandwidth memory chips will contribute to solid operating margins, demand for standard DRAM chips used in smartphones and PCs may slow, BI added. .
Friday: Guizhou Moutai (600519 CH)’s third-quarter earnings per share and sales will increase by mid-to-high teens, supported by strong demand, BI said. He added that because distilleries sell to wholesalers and distributors at factory prices, lower wholesale sales prices are unlikely to have a major impact on revenue.
Luxshare Precision (002475 CH)’s third-quarter adjusted net income could increase by 22.4%. BI said it has received orders from Apple for its Vision Pro headset and AirPods. The company currently derives more than three-quarters of its revenue from Apple, raising concerns about its diversification efforts in the coming years.
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