Shares of leading Indian private-sector banks witnessed a sharp decline on Monday as concerns over weak earnings and shrinking net interest margins (NIMs) weighed on investor sentiment.
Shares of the country’s largest private lender, HDFC Bank, along with Axis Bank, fell nearly 5 per cent during trading after both banks reported pressure on their margins for the April-June quarter.
HDFC Bank’s net interest margin declined by 13 basis points sequentially to 3.4 per cent from 3.53 per cent in the previous quarter. Similarly, Axis Bank’s NIM contracted by 16 basis points from the previous quarter to 3.46 per cent during the June quarter.
Global brokerage firm Citi highlighted that margin compression and weaker fee income have added pressure on bank earnings. The brokerage said net interest margins will remain a key factor to watch in the coming quarters.
HDFC Bank shares have remained under pressure since March following the resignation of part-time chairman Atanu Chakraborty, who had raised governance and ethical concerns. The bank later stated that an independent legal review did not find evidence supporting the concerns mentioned in the resignation letter.
Despite margin challenges, analysts noted that loan growth momentum has improved, particularly in the commercial and corporate lending segments. However, retail loan growth remained relatively subdued.
Axis Bank also reported improved loan growth, driven mainly by corporate sector demand, while the retail segment continued to face moderation. Brokerage firm Motilal Oswal attributed the sharp decline in Axis Bank’s NIMs largely to the impact of loan repricing and revised its earnings estimates for the bank for the current and next financial years.
The market reaction reflects growing investor focus on profitability trends, margin stability and future growth prospects in the private banking sector.
