How are HDFC Bank's Net Interest Margins performing?

HDFC Bank's Net Interest Margin on total assets expanded by 8 basis points to 3.35% in the December quarter.

What factors are supporting private banks' margins?

Banks are benefiting from delayed deposit repricing, a higher share of low-cost Casa funds, and selective lending.

When will the full impact of the latest rate cut affect bank margins?

The full impact of the most recent 25 bps rate cut is expected to be felt in the March quarter and possibly beyond.

Home / Business and Economy / Banks Brace for Margin Squeeze Amidst Rate Cuts

Banks Brace for Margin Squeeze Amidst Rate Cuts

19 Jan

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Summary

Banks expect margins to be supported by deposit repricing lags.
HDFC Bank and ICICI Bank report stable or improving Net Interest Margins.
Further rate cuts' full impact will be felt in upcoming quarters.

Banks Brace for Margin Squeeze Amidst Rate Cuts

Management commentary from the December quarter earnings season indicates that private banks' net interest margins (NIMs) are likely to be supported by several factors. These include a lag in deposit repricing, a larger share of low-cost current and savings accounts (Casa) funds, and more selective lending practices. HDFC Bank reported an 8 basis points increase in NIM on total assets for the quarter, with its CFO noting that the full effect of the latest 25 bps rate cut is still working its way through the system.

ICICI Bank expects NIMs to remain largely range-bound, balancing the repricing of external benchmark loans against competitive intensity and deposit repricing. Similarly, RBL Bank and Federal Bank saw their NIMs rise in the December quarter, attributing this to portfolio mix, loan repricing, and a better deposit mix. However, Federal Bank's management cautioned that the full impact of the recent 25 bps rate cut would be evident in the March quarter.