Rising credit costs for Indian banks and their struggle to attract customer deposits to alleviate them will remain at the center of discussion when HDFC Bank and Kotak Mahindra Bank report their results on Saturday.
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.
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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.
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Highlights to note:
Saturday: HDFC Bank and Kotak Mahindra Bank’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’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: Hindustan Unilever’s second-quarter sales are likely to rise faster than the first quarter on the back of rural demand recovery, analysts at PL Capital and Motilal Oswal say 5 % growth is expected. Still, higher prices for palm oil, cocoa and coffee are likely to have weighed on margins, with consensus forecasts predicting a 1.3% decline in profits.
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