Axis Bank and Allahabad Bank on Friday posted solid, forecast-beating growth in June quarter profit but mid-sized Union Bank disappointed with a drop in profit.
State-run Union Bank also cut its credit and deposit growth target for FY12 in the face of slackening demand after posting a net profit drop of 23 percent that lagged forecast.
"It was a lean season," M.V. Nair, chairman and managing director of state-run Union Bank told reporters at its earnings press conference.
"Also, the tight policy stance of the RBI and the weak investment climate impacted new project announcement and consumer demand," he added.
Indian lenders have warned of a slowdown in credit offtake this fiscal year as high interest rates curb demand for loans and have suggested to the central bank to pause its rate hike cycle.
Still, the Reserve Bank of India (RBI) is expected to raise rates further next week, a Reuters poll showed.
It has raised key lending rate 10 times since March 2010 to tame high inflation, forcing banks to pass on some of the increase to customers, hurting loan demand.
Earlier this week, India's No.3 lender HDFC Bank also said credit demand from corporates for new projects may be muted in Asia's third-largest economy.
However, private banks such as Axis, Kotak Mahindra and HDFC Bank expect loans to grow at a faster pace than the industry average led by deeper branch networks and stronger brand.
"We've seen fairly okay demand. We should definitely be doing better than the industry rate of 19 percent," said Somnath Sengupta, executive director, Axis Bank.
The bank's net interest margin slipped to 3.28 percent in the June quarter from 3.71 percent a year-ago on slower build-up in low cost, current account savings account deposits as people preferred high yielding term deposits.
Smaller peers Kotak Mahindra and YES Bank also saw a drop in NIMs on higher borrowing costs, but said the pressure could ease in the coming quarters.
Axis, like others, also does not see further pressure on margins, going forward and expects it to be around 3.3-3.5 percent.
Union Bank that saw its NIM dip to 3.1 percent from 3.44 in the previous quarter, said it will inch it up to 3.2 percent by the end of the fiscal as the lagged impact of passing on the increase in costs will aid.
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