Slow Economy breaks HDFC Bank’s 30% growth tempo

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Slow Economy breaks HDFC Bank’s 30% growth tempo

#1 Postby Shivani » Wed Oct 16, 2013 10:43 am

Slow growth in Economy has effected HDFC Bank a has stunned the street with the slowest profit growth in a decade casting a pall of gloom over private sector bank stocks which had become a favourite of investors due to expectations of higher growth and better asset quality. The bank which delivered a 30% growth rate in profit in past 10 years reported a 27% rise in profit for the September quarter.

This might have happened due to a sharp slowdown in retail product business which did not give bank enough opportunities to grow its business. Retail loans grew close to 17%, this figure might look good to you...But in the previous quarter they grew by about 25%.

Although slow economic growth is not the only factor for this, it is partially responsible for the fall in loan growth at HDFC Bank. The liquidity tightening measures by the central bank in the last quarter drove short-term interest rates higher.

HDFC Bank's second quarter loan book growth was slower than market expectations, as the economy expanded the least in a decade. Analysts expect the next few quarters to remain subdued for the entire sector. Private sector banking stocks had risen in anticipation of higher growth and lower non-performing assets after bad loans at State Bank of IndiaBSE -2.09 %, the country's biggest lender, surged to 5.56 per cent of its total advances in the quarter to June.

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