HDFC Bank: Analysts see muted profit growth in Q4 amid higher provisions

HDFC Bank preview: Near-term focus, analysts said, would be the status of the merger with HDFC Ltd

HDFC Bank Q4 preview: India's biggest private lender, HDFC Bank’s January-March quarter (Q4) net profit for FY23 may come in tepid on a quarterly basis, analysts said. This, they opine, would be on the back of a significant rise in provisions ahead of the bank’s merger with HDFC Ltd.

The lender is slated to report its Q4 earnings on Saturday, April 15.

According to brokerages' estimates, HDFC Bank's Q4FY23 bottom-line, as well as net interest income (NII) may fall up to 3 per cent QoQ, while provisions are seen rising up to 21 per cent QoQ.

In the October-December quarter (Q3FY23), HDFC Bank's profit after tax (PAT) was Rs 12,259.5 crore, and NII was Rs 22,290.4 crore. A year-ago (Q4FY22), they were Rs 10,055.2 crore, and Rs 18,872.7 crore, respectively.

 

Here's how key brokerages expect the Q4FY23 numbers to look like:

Prabhudas Lilladher

The brokerage expects NII to clock an impressive 32.5-per cent year-on-year (YoY) growth of 32.5 per cent at Rs 24,999 crore. This would be nearly 9 per cent higher on a QoQ basis, led by strong loan growth of over 6 per cent QoQ.

Margin growth, however, could be flattish at 4.93 per cent vs 4.38 per cent YoY, and 4.90 per cent QoQ. The bank may build in buffer provisions to the tune of Rs 3,400 crore, up 21.1 per cent QoQ, and 2.6 per cent YoY, which would lead to PAT of Rs 12,245.4 crore.

ICICI Securities

It expects NII growth of 21 per cent YoY to Rs 22,958 crore even though moderation is seen in credit growth to 16 per cent. Corporate advances may have slowed to 12 per cent YoY, while retail advances could be healthy at 21 per cent YoY. It pegs net interest margin (NIM) at 4.1 per cent.

ICICI Securities sees steady gross non-performing asset (GNPA) ratio at 1.21 per cent, and net NPA ratio at 0.32 per cent, while provisions could be elevated at Rs 3,361 crore, building in merger buffers.

PAT, it expects, could grow 19 per cent YoY to Rs 11,981 crore with a mild decline of 2.3 per cent sequentially.

Sharekhan

This brokerage pegs PAT at Rs 11,905 crore, down 3 per cent QoQ; while profit before tax (PBT) is seen falling 2 per cent QoQ to Rs 15,873 crore.

It expects NIM and asset quality to remain stable, but says any conversation on regulatory dispensations would be key monitorable.

Motilal Oswal Financial Services

It pegs loan book at Rs 1.59 trillion, clocking a growth of nearly 17 per cent YoY. Meanwhile, deposits are seen at Rs 1.81 trillion, up 17 per cent YoY.

The brokerage says margin expansion will be an important metric, while deposit traction, asset quality in Agri/Unsecured book and slippages, and commentary about Credit Cards, traction in fee income, and the merger with HDFC will be among the key monitorables.

Kotak Institutional Equities

It expects HDFC Bank's NII and PAT to fall 3 per cent QoQ each to Rs 22,290.4 crore, and Rs 11,870.6 crore, respectively.

It expects treasury income to rise 16 per cent sequentially to Rs 303.4 crore, while fee income could be Rs 6,324.6 crore (up 4.5 per cent QoQ/12.3 per cent YoY).

It also expects gross NPA ratio to be stable QoQ, led by lower slippages (less than 2% per cent), better recovery, and strong loan growth outlook. Near-term focus, it says, would be the status of the merger with HDFC Ltd (conversation on regulatory dispensations).