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Wal-Mart profit beats expectations; stock jumps

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Wal-Mart Stores Inc (WMT.N) on Thursday reported a higher-than-expected quarterly profit as increased drug prices and solid demand for basic apparel items boosted sales, and its shares jumped more than 7 percent.

The company’s performance bucked a string of weak results from competitors. On Wednesday, rival Target Corp (TGT.N), which caters to a higher-income customer than Wal-Mart, gave a cautious outlook and reported a lower-than-expected rise in quarterly sales due to unseasonable weather and soft demand.

“It looks like the middle-to-higher-income customers have cut back, but the lower-income customer is spending,” said Edward Jones analyst Brian Yarbrough.

The upbeat results also suggest Wal-Mart may be benefiting from its $2.7 billion investment to increase entry-level wages and in training of its workforce. Store visits rose 1.5 percent in the first quarter ended on April 29.

“Overall a pretty strong quarter,” Chief Financial Officer Brett Biggs said in an interview. “We are very pleased with the traffic increases, and I think that goes along with what we are seeing with customer experience scores that continue to improve.”

Lower utility costs resulting from warmer-than-usual winter weather also supported profitability, Wal-Mart said.

Net income attributable to Wal-Mart fell to $3.08 billion from $3.34 billion a year earlier, reflecting the costs of boosting the company’s minimum wage to $10 an hour and investing in automated warehouses dedicated to filling online orders.

Earnings per share of 98 cents beat the analysts’ average estimate of 88 cents, according to Thomson Reuters I/B/E/S.

Sales at U.S. stores open at least a year rose 1.0 percent, excluding fuel price fluctuations. That marked the seventh straight quarterly rise and was stronger than market expectations for an increase of 0.5 percent, according to research firm Consensus Metrix.

For the current quarter, Wal-Mart said it expected an increase of about 1.0 percent in U.S. same-store sales. It forecast earnings per share of 95 cents to $1.08, against market expectations of 98 cents.

First-quarter revenue rose 0.9 percent to $115.9 billion despite a $3.5 billion hit from a stronger dollar, which reduces the value of overseas sales.

Online sales growth again decelerated, to 7 percent in the first quarter from 8 percent, 10 percent, 16 percent and 17 percent in the previous periods.

Biggs said e-commerce sales grew faster in the U.S. market than overseas, but the overall performance fell short of its objectives.

Asked about slowing online growth, Biggs said Wal-Mart had yet to capitalize on big changes it made over the past few years, which included the rollout of a new technology platform and the ramping up of its e-commerce assortment to 10 million items.

“That’s a lot of change over a two-, three-year period,” Biggs said. “We are just really starting to come out of some of those big changes.”

Shares of Wal-Mart were up 7.5 percent at $67.94 in early trading.

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HDFC Bank’s Q3 standalone net profit rises 18%

The rise in net interest income was driven by advance growth of 15.6 per cent and a core net interest margin for the quarter of 4.2 per cent.

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HDFC Bank

Mumbai, Jan 16 : Lending major HDFC Bank on Saturday reported an 18.1 per cent increase in standalone net profit for the quarter ended December 31 of FY21 on a year-on-year basis.

The bank’s net profit for the third quarter of FY21 rose to Rs 8,758.3 crore on a YoY basis.

“After providing Rs 3,013.6 crore for taxation, the bank earned a net profit of Rs 8,758.3 crore, an increase of 18.1 per cent over the quarter ended December 31, 2019,” the bank said in a statement.

The bank’s net revenues (net interest income plus other income) grew to Rs 23,760.8 crore during the period under review from Rs 20,842.2 crore for the quarter ended December 31, 2019.

Besides, net interest income (interest earned less interest expended) for the quarter ended December 31, 2020 grew by 15.1 per cent to Rs 16,317.6 crore from Rs 14,172.9 crore during the corresponding period of the previous fiscal.

The rise in net interest income was driven by advance growth of 15.6 per cent and a core net interest margin for the quarter of 4.2 per cent.

“The bank’s persistent focus on deposits helped in the maintenance of a healthy liquidity coverage ratio at 146 per cent, well above the regulatory requirement.”

Furthermore, the bank made provision and contingencies worth Rs 3,414.1 crore as against Rs 3,043.6 crore during the quarter ended December 31, 2019.

“Total provisions for the current quarter include contingent provisions of nearly Rs 2,400 crore for proforma NPA as described in the asset quality section.”

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RBI remains ‘steadfast’ to take necessary steps to support economy: Guv

The RBI Governor’s statement gains significance as the Indian stock market has surged amid the pandemic and scaled new highs in the past one month, raising concerns of stretched valuations.

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Shaktikanta Das

New Delhi, Jan 16 : Reserve Bank Governor Shaktikanta Das on Saturday said that the central bank remains committed to take any further necessary measures to support the economy.

Delivering the Nani Palkhivala Memorial Lecture on Saturday, Das said that RBI’s principal objective during the pandemic was to support economic activity and the policies have helped in easing the severity of the economic impact of the pandemic.

“I would like to unambiguously reiterate that the Reserve Bank remains steadfast to take any further measures, as may be necessary, while at the same time remaining fully committed to maintaining financial stability,” he said.

RBI’s approach to the Covid situation included measures such as loan moratoriums, easing of working capital financing and deferment of interest restructuring among others.

Speaking of the recent bull run in the financial markets, the RBI Governor said that domestic financial markets must remain prepared for sudden decline going ahead in case risk aversion takes hold among investors globally.

“While abundant capital inflows have been largely driven by accommodative global liquidity conditions and India’s optimistic medium-term growth outlook, domestic financial markets must remain prepared for sudden stops and reversals, should the global risk aversion factors take hold,” he said.

The RBI Governor’s statement gains significance as the Indian stock market has surged amid the pandemic and scaled new highs in the past one month, raising concerns of stretched valuations.

This is the second time in a week that Das has raised concerns regarding the bullish trend in stock market.

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Fitch says India’s GDP to expand by 11% in FY22

It added that India’s medium-term growth to slow to around 6.5 per cent after the initial rebound.

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GDP means for you and me

Fitch Ratings says India’s GDP to expand by 11% in 2021-22 after falling by 9.4% in current FY21 fiscal.

It added that India’s medium-term growth to slow to around 6.5 per cent after the initial rebound.

India’s coronavirus-induced recession has been among the most severe in the world, amid a stringent lockdown and limited direct fiscal support. The economy is now in a recovery phase that will be further supported by the rollout of vaccines in the next months and we expect GDP to expand by 11.0% in FY22 after falling by 9.4% in FY21.

However, we expect the medium-term recovery to be slow. Supply-side potential growth will be reduced by a slowdown in the rate of capital accumulation – investment has recently fallen sharply and is likely to see only a subdued recovery. This will weigh on labour productivity and our projection of supply-side potential GDP growth for the six-year period FY21 to FY26 has been lowered to 5.1% p.a. compared to our pre-pandemic projection of 7% p.a.

Our historical analysis of India’s growth performance highlights the key role played by a high investment rate in driving growth in labour productivity and GDP per capita over the last fifteen years.

But investment has fallen sharply over the last year and the need to repair corporate balance sheets and firm closures will weigh on the pace of recovery.

Constrained credit supply amid a fragile financial system is another headwind for investment. The banking sector entered the crisis with generally weak asset quality and limited capital buffers. Appetite for lending will be subdued, particularly as credit-guarantee and forbearance measures rolled out in the crisis start to be unwound.

The economy should be able to grow somewhat faster than estimated supply-side potential over the medium term following the unprecedented downturn in FY21. But our projection for the medium-term recovery path – at around 6.5% p.a. over FY23 to FY26 – would leave GDP well below its pre-pandemic trend.

The research report, “India Set for Slow Medium-Term Recovery” is available at the above link and at www.fitchratings.com.

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