July 20 (Reuters) - HDFC Bank slid 4.6% to 782.25 rupees on Monday after its June-quarter margin miss outweighed steady loan growth, dragging the benchmark Nifty 50 and Indian banking stocks, while ICICI Bank rose 1% on strong results, limiting some overall losses.
Investors were focussed on profitability rather than loan growth, according to analysts.
HDFC Bank's loans and deposits grew about 15.4% and 13.3%, respectively, and profit rose 5%. However, net interest margin, a key gauge of lending profitability, was at 3.26%, below the 4% level seen before the bank merged with its parent HDFC in 2023.
"HDFC Bank was relatively weaker" among major private lenders this quarter, Jefferies said, noting that its push into faster-growing corporate loans came at the cost of margins.
The Nifty 50 fell 0.7%, financials slid 1.9%, Nifty banks were down 1.6% and private banks declined 2.8%.
Citi said softer fee income and weaker-than-expected net interest income prompted it to trim its fiscal 2028 earnings estimates by 1%-2% for HDFC Bank.
STRONG LOAN GROWTH, MARGINS UNDER PRESSURE
Axis Bank dropped 5.3% and Kotak Mahindra Bank declined 2.9% after posting in-line results.
Analysts expect margin pressure to continue in the current quarter before easing later in the fiscal year as funding costs moderate.
ICICI Bank, which analysts described as the sector's strongest performer, rose 1% after an earnings beat, with J.P. Morgan citing stronger NII growth, margin resilience and robust asset quality. The stock was the top gainer on the private bank index.
The results underpin a common trend across private lenders with loan growth remaining strong, driven by demand from corporate and small and medium enterprises, but margins remain under pressure as banks compete for deposits and absorb higher funding costs.
Loan growth among major private banks remained in the 15%-20% range during the quarter, according to Jefferies.
Reporting by Kashish Tandon in Bengaluru; Editing by Mrigank Dhaniwala and Janane Venkatraman
Source: Reuters