HDFC Bank Q3 results preview: Profit growth seen at 30%; NIM recovery likely, provisions may rise

HDFC Bank is likely to report a 30 per cent-plus growth in year-on-year net profit for the December quarter on a 25 per cent-plus growth in net interest income (NII). Net interest margin (NIM) is seen recovering marginally from Q2 low of 3.4 per cent on total assets and 3.6 per cent on interest earning assets. Provisions for the quarter may rise in single digits, but the asset quality for the merged entity is expected to remain broadly stable.

For the December quarter, the private lender registered a provisional loan growth of 62.4 per cent, with retail loans growing 111 per cent YoY, commercial and rural banking loans 31.5 per cent and other wholesale loans 11 per cent YoY. The bank’s deposits grew 27.7 per cent.

KRChoksey Shares and Securities sees HDFC Bank to report 32 per cent rise in net profit at Rs 16,180.70 crore against Rs 12,259 crore YoY. It sees NII at Rs 29,371 crore, up 27.8 per cent YoY over Rs 22,988 crore. "The cost-to-income ratio is expected to be around 40.2 per cent against 39.6 per cent in Q3FY23. For the quarter, we expect the asset quality to remain stable," the brokerage said.

Motilal Oswal Securities sees profit to rise 32.5 per cent YoY to Rs 16,242 crore on 26.8 per cent YoY rise in NII at Rs 29,142 crore. It believes margin is likely to see slight improvement from the Q2 lows. It sees gross non-performing assets at 1.3 per cent against 1.2 per cent YoY.

Axis Securities, which sees profit rising 30.2 per cent YoY, said margins likely bottomed out in Q2FY24 and is expected to improve sequentially. It sees provisions for the quarter rising 6.7 per cent YoY to Rs 2,994 crore. NII growth is seen at 27.8 per cent while growth in non-interest income is seen at 30.4 per cent YoY.

"Sequential loan growth will be in the 4% ballpark due to idiosyncratic growth trajectory. NII growth will be similar to average loan growth due to rise in cost of deposits outpacing yield on advances being offset by liquidity unwind. Consequently, NIM will be stable sequentially. Sequential fee income growth will slightly exceed loan growth due to linkage with payments activity. Opex growth will slightly lag loan growth. Slippages would be broadly stable on sequential basis. Provisions will be stable sequentially due to idiosyncratic aspects," YES Securities said.

Emkay Global said margins should recover a bit (5 basis points QoQ) with the drag of ICRR being largely behind and MCLR revision. The bank is expected to report elevated NPAs on a merged basis, including agri slippages, it said.

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