Weak credit growth and rate cuts to squeeze profit at HDFC, ICICI Banks
Reserve Bank of India
's rate cuts — 100 basis points since the start of the year — and a reduction of the cash reserve ratio to boost liquidity and further reduce funding costs in order to buoy the economy.
The moves came as lending growth weakens, with gross bank
credit growth
hitting a three-year low in May. India's finance minister Nirmala Sitharaman asked government-owned banks to boost lending in order to fuel
economic growth
, according to Mint. Her ministry is also said to be considering issuing new banking licenses for the first time in almost a decade.
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Bloomberg
Efforts to shore up the economy are under way as the country is gradually recovering after a consumption slowdown last year. Firms like
Nestle India
Ltd. — due Thursday — should show an acceleration in revenue growth led by better product volumes.
Tariff concerns will cloud
Infosys
Ltd.'s Wednesday update after rival
Tata Consultancy Services
Ltd. said many American clients were cautious about tech investments given ongoing economic uncertainty. Shares in Tata Consultancy Services,
HCL Technologies
Ltd. and
Tech Mahindra
Ltd. all dropped after reporting earnings.
Live Events
Highlights to look out for:
Saturday:
HDFC Bank
(HDFCB IN) and
ICICI Bank
(ICICIBC IN)
profit growth
is seen limited by thinning margins, as loans typically re-price faster than deposits when interest rates change. HDFC Bank said earlier in July gross advances grew 0.4% on the quarter, trailing deposit growth of 1.8%, as it continues efforts to bring down its loan-deposit ratio. HDFC Bank will also consider issuing bonus shares for the first time. Meanwhile,
ICICI Bank
is expected to set aside higher provisions as unsecured lending rises, raising
asset quality risks
, according to Bloomberg Intelligence.
Monday:
Eternal's (ETERNAL IN) first-quarter profit is expected to halve on losses at its quick-commerce business Blinkit. The unit is investing in expanding its 'dark stores' network, where it services quick-commerce orders, and analysts will watch for updated guidance on when profits are expected. Strategic steer on its new 'Going Out' business will equally be in focus.
Tuesday:
No major earnings.
Wednesday:
Infosys (INFO IN) could lower or pull its revenue growth guidance as demand for new projects deteriorates amid worsening economic conditions, BI said. Watch for commentary on whether clients are canceling projects, especially in industries hit by US tariffs, Kotak Institutional Equities said.
Thursday:
Nidec's (6594 JP) sales would likely be affected by uncertainties in the auto market, as demand for electronic parts and motors slow in Japan, according to BI. Founder Shigenobu Nagamori said the firm's appetite for takeovers remains intact, following its earlier decision to withdraw a $1.8 billion hostile bid for Makino Milling Machine Co.
- SK Hynix's (000660 KS) second-quarter operating profit likely rose 63%, consensus shows. Margins could reach 45% to 47%, BI said, supported by robust average selling prices for memory chips. Meanwhile DRAM shipments might have risen above its guidance. Seasonal demand could kick up DRAM and NAND shipments in the third quarter, BI added.
- Nestle India's (NEST IN) first-quarter earnings may be supported by higher revenue contributions from both its domestic and export segments. The company is expected to be on an improving growth trajectory, Citi said. Watch out for strategic initiatives following a change in leadership.
-
Bajaj Finance
's (BAF IN) lending growth is expected to slow in keeping with sector peers. Asset quality trends may be softer in the non-banking finance sector as a weaker macro environment has slightly exacerbated usual seasonal weaknesses, according to Jefferies.
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