HDFC Bank Q4 preview: Net interest income, PAT likely to rise YoY, management commentary to be key

HDFC Bank Q4 FY23 results: HDFC Bank, the largest private lender in the country, is set to report its earnings for the period ended on March 31, 2023. The merger bound lender is likely to report a strong performance on a yearly comparison, while the performance may remain muted on a sequential basis.

Brokerage firms are expecting another strong quarter from the banks, where private lenders are likely to report an earnings growth of about 25 per cent on a year-on-year (YoY) basis, while quarter-on-quarter (QoQ) performance is seen to be muted. Return on Assets (RoA) is seen in the range of 1-3 per cent.

Brokerage firms see NIMs to grow around 17 per cent YoY with a stable net interest margin (NIMs) will be aided by stable net interest incomes (NIIs). Credit cycle gains continue to aid earnings; commentaries on loan growth, NIM trajectory.

Antique Stock Broking expect HDFC Bank to report a 28 per cent YoY growth and 5 per cent QoQ rise in net interest income at Rs 24,073.6 crore, while its net profit is seen at Rs 12,020.6 crore, up by 20 per cent YoY but a drop of 2 per cent QoQ. Asset quality to remain strong and credit cost contained, it said.

Antique expects HDFC Bank to report a PPP at Rs 19,179.7 crore, flat on QoQ basis while 24 per cent up on YoY terms. HDFC Bank remains among its top picks from the banking space. It has a buy rating on the stock with a target price of Rs 1,900.

Another brokerage firm Prabhudas Lilladher (PL), expects HDFC Bank's NII at 24,999.9 crore, rising 33 per cent YOY and 9 per cent QoQ. PPoP are seen at 19,727.2 crore, up 21 per cent YoY and 4 per cent QoQ and net profit to be at Rs 12,245.4 crore, flat on QoQ basis but 22 per cent up YoY.

PL expects HDFC Bank's gross non-performing assets (NPAs) to be at 1.22 per cent in Q4FY23, while net NPA as seen at 0.33 per cent. It has a target price of Rs 1,850 on HDFC Bank and added that the bank may continue to build in buffer provisions, which would lead to steady earnings.

Axis Securities is also positive on HDFC Bank amid the result season and said that management commentary on retail growth, along with merger progress will be the key. "NII to be supported by healthy loan growth and stable margins QoQ, while improved fee income and steady cost ratios to support PPOP growth. Asset Quality to remain stable QoQ and credit costs to remain flat," it said.

Axis expects NIIs at Rs 23,854 crore, up 26 per cent YoY and 4 per cent QoQ, while net profit is likely to be at 12,238 crore, 22 per cent QoQ and 22 per cent YoY. It sees HDFC Bank to report an EPS of Rs 22, which was Rs 18.1 in the same quarter previous fiscal.

Motilal Oswal Financial Services pegs HDFC Bank's net profit at Rs 12,097 crore, rising 20 per cent on YoY basis, but falling more a per cent in sequential terms. For the entire financial year, its revised estimates for the bottomline stand at Rs 44,160 crore.

BNP Paribas has a P/B multiple based target price of Rs 2,180 on HDFC Bank. However, it has cited macro risks from the inflation-interest rate- GDP growth dynamic as the key threat to the lender.

"HDFC Bank's provisioning adequacy is heavily dependent on the fact that its stressed asset numbers are the very lowest in the sector. If this were to change for any reason, the provisioning burden on RoA will be high. However, such a change is very unlikely given focus on prime assets," it added in its report.
In the third quarter of FY23, HDFC Bank reported an 18.5 per cent YoY rise in net profit to Rs 12,259 crore. Net interest income in the quarter increased nearly 25 per cent on-year to Rs 22,988 crore.
It is to be noted that in a recent business update, HDFC Bank said its loans stood at Rs 16,00,500 crore at the end of March 31, 2023, marking a quarter-on-quarter growth of 6.2 per cent. Its advances or loans expanded 6.5 per cent sequentially.

Watch: HDFC Bank Q4 Results today: Key things to watch out for

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