HDFC Bank Q4 preview: Net profit may jump 30% YoY; biz growth guidance eyed

Earlier this month, the private lender had informed the exchanges that its advances had grown 6.3 per cent QoQ to Rs 9,93,000 crore during the quarter under review

Private lender HDFC Bank is likely to remain unfazed by the coronavirus (Covid-19)-led slowdown, at least in the March quarter of FY20 (Q4FY20), as analysts see the bank clocking a near 30 per cent year-on-year (YoY) jump in the net profit at Rs 7,616 crore.

The Mumbai-based lender is scheduled to report its March quarter numbers on Saturday, April 18.

Nirmal Bang Institutional Equities pegs the lender’s profit at Rs 7,616.2 crore, a 29.4 per cent growth from Rs 5,885.1 crore reported in the March quarter of the previous fiscal (Q4FY19). Sequentially, the PAT is seen growing 3 per cent from Rs 7,416.5 crore.

Similarly, analysts at ICICI Securities expect the bank’s profit to rise 28.6 per cent YoY to Rs 7,568.2 crore on the back of robust traction in deposits, and healthy fee-based income.

“Traction in deposit remains robust at nearly 24 per cent YoY to Rs 11.46 lakh crore. Sequentially, steady margin at 4.2 per cent and healthy fee-based income is seen keeping pre-provision profit growth at 21.8 per cent YoY to Rs 13,206 crore,” they wrote in an earnings preview note. The bank’s pre-provision profit in Q4FY19 was Rs 10,914.4 crore and Rs 11,005.5 crore in the December quarter of FY20.

Early this month, the private lender had informed the exchanges that its advances had grown 6.3 per cent quarter-on-quarter (QoQ) to Rs 9,93,000 crore during the quarter under review, while deposits had risen 7.4 per cent QoQ to Rs 11,46,500 crore.

“On an annual basis, the share of advances has touched a four-quarter high of 21 per cent, while deposits have jumped 24 per cent. This was the third consecutive quarter when the bank clocked an over 20 per cent growth in deposits,” the bank said.

Given the stable growth in advances, analysts project the bank’s net interest income (NII) to come in the range of Rs 14,788 crore to Rs 15,005 crore, up 13 to 14.5 per cent YoY.

Provisions may rise; asset quality eyed

Analysts at Kotak Institutional Equities expect the bank to build contingent provisions for any slippage arising due to the virus-led lockdown, and peg the gross non-performing loan ratio at 1.5 per cent of loans.

“Led by slippages in auto and unsecured retail loans, gross NPA ratio is seen inching up around 6-8 bps QoQ and credit cost (including contingent provision) at 30 bps of advances,” notes ICICI Securities in their earnings expectation report.

During the previous quarter of the current financial year, the GNPA ratio was 1.42 per cent, while the NNPA ratio was 0.48 per cent. That apart, the bank had set aside funds for provisions and contingencies worth Rs 1,889.22 crore in Q4FY19, while the same stood at Rs 3,043.56 crore in Q3FY20.

Meanwhile, Edelweiss Securities believes asset quality trend will likely remain benign. They would, however, watch out for the management’s stance in stepping up coverage on retail book, and business growth guidance given the slowdown in the economy due to Covid-19.

During the quarter under review, the bank’s stock price has crashed 32.2 per cent, as against a 28.56 per cent fall in the benchmark S&P BSE Sensex.