HDFC Bank’s results are “super confusing”, said Deepak Shenoy, founder and CEO of portfolio manager, Capitalmind, explaining in detail why he thinks so. Shenoy said that reports of HDFC Bank showing 50 per cent growth is misinformed, since it is only 10 per cent.
Shenoy then breaks it down. “Results from HDFC Bank are super confusing because it doesn't include the impact of HDFC merger for the previous year. Let's try and decode this a little,” he said, adding that HDFC had only one “associate” last year, which is HDFC Bank. HDFC consolidated would have revenue of all subsidiaries and the percentage of profits from associates as they own, he said.
“More than 50 per cent ownership = subsidiary, more than 20 per cent = associate,” he said, reasoning that HDFC had 24 per cent of HDFC Bank. “Last year i.e. Sep 2022, HDFC + HDFC Bank together had net profit (after tax) of Rs 18,205 crore. But we must back out the "associate" profit from HDFC (which would be double counted). That was Rs 2,954 crore. Meaning, last year, net profit of the combined entity (consolidated and deduplicated) was Rs 15,251 crore. (September quarter 2022) This quarter, September 2023, they made Rs 16,811 crore. This is about 10.2 per cent higher than last year,” he said.
Shenoy added that this is much lower because HDFC Bank used to easily deliver 15 per cent or more, but it is not unexpected considering they just merged. “But you have to know the true picture. This headline of "HDFC Bank shows 50 per cent growth in profit" is very uninformed. It's 10 per cent,” he said.
Shenoy’s tweet comes after HDFC Bank released its first quarterly earnings following the merger of HDFC Bank with parent HDFC (Housing Development Finance Corp) in a $40-billion deal.
HDFC Bank announced that it recorded a 51 per cent increase in standalone net profit at Rs 15,976 crore for the July-September quarter, against a standalone net profit of Rs 10,606 crore in the year-ago period.
The bank’s shares climbed 2 per cent in Tuesday’s trade, adding over Rs 20,000 crore to its market capitalisation. The stock rose 1.86 per cent to hit a high of Rs 1,558 on BSE. That said, the stock cut gains and was later trading 0.88 per cent higher at Rs 1,543, commanding a m-cap of Rs 11,69,874.21 crore over its Monday's close of Rs 11,59,638.76 crore.
Also read: HDFC Bank Q2 results: Lender's net profit jumps 51% to Rs 15,976 cr
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