HDFC Bank's Q4 performance strong, but investors will have to be wary

Provisioning costs higher than expected; FY21 EPS estimated to decline by 2-4 per cent

If investors have to judge HDFC Bank’s March quarter (Q4) performance based on headline numbers, the bank would easily get a thumbs-up. But, as the numbers do not fully reflect the pain ahead, investors will have to be wary. The significant difference in FY21 earnings estimate (3.6 per cent decline in case of ICICI Securities; 11.6 per cent increase estimated by Prabhudas Lilladher) (compared to 20 per cent plus growth seen in past), is an indication of the road ahead.

Net interest income (NII) growth at 16.2 per cent year-on-year (yoy) exceeded expectations, but elevated provisioning costs restricted profit before tax