Large private banks in India were sold after the latest quarterly performance announcement. HDFC Bank and Axis Bank both fell by 5 per cent on Monday, and the market is concerned that the net interest rate differential between the two banks continues to shrink and may continue to be under pressure from the profits.
Net interest difference double down
HDFC Bank ' s net interest rate for the quarter from April to June declined to 3.4 per cent, down 13 basis points from 3.53 per cent in the previous quarter. Axis Bank's net interest rate differential fell to 3.46 per cent during the same period, down 16 basis points from the previous quarter.
The decline in net interest rates was generally seen by the voucher as the direct cause of the weakening of the stock price. Citi ' s report states that net interest differentials, combined with fee earnings, are putting a strain on profitability, and subsequent net interest differentials remain the focus of market attention.
Business loans support growth
Despite the pressure on the profit margin, the Agency did not believe that the growth of loans by the two banks had been significantly slower. Citi mentioned that the HDFC Bank loan power, based in Mumbai, has improved, mainly from the business and business sectors.
However, the recovery of retail loans remains limited. The report notes that the retail lending performance of the HCFC Bank remains weak, which also allows the market to be cautious about the quality of its subsequent growth.
Axis' profits are expected to be downgraded.
In a report published on Monday, Motilal Oswal stated that the Axis Bank net interest rate differential was significantly narrower, mainly because of the impact of the loan repricing. At the same time, it noted that the growth of Axis loans was also driven more by business demand and that retailing remained relatively flat.
Based on the latest performance, the Indian voucher has reduced the current fiscal year, March 2027, and the expected profits for the next fiscal year by 2 per cent. It also shows that the market's judgement of subsequent profit repair of the bank block is becoming more cautious.