HDFC Bank shares drop on profit decline

Shares of the Indian HDFC Bank experienced a sharp decline of 4.6%, reaching 782.25 Rupees after its Q2 results were announced, which showed a deterioration in profit margins despite growth in loans and deposits by 15.4% and 13.3%, respectively, and a 5% increase in profits. Profit margins fell to 3.26%, the lowest level since its merger with the parent company in 2023, due to the bank’s focus on boosting corporate loan growth at the expense of margins. This strategy has somewhat weakened its performance relative to other leading lenders in the sector. As a result, the financial sector index in the Indian stock market declined by 1.9%, with the Nifty Bank Index and Citi Profit Index both decreasing, while ICICI Bank rose by 1% thanks to strong results. Competition for bank deposits and rising funding costs remain challenges for the sector, and this situation is expected to persist into the next quarter before showing signs of improvement.

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