Earnings Outlook
HDFC Bank Jul-Sept PAT seen near-flat as loan-deposit ratio cools
This story was originally published at 16:21 IST on 16 October 2024
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By Kshipra Petkar
MUMBAI – Efforts taken by HDFC Bank to bring down its loan-to-deposit ratio are seen weighing on its net profit for the September quarter, as the lender reined in its loan book to match the modest pace of deposit mobilisation, according to analyst reports. The net profit of India's largest private sector bank is expected to rise merely 2.9% on year to INR 164.46 billion for the reporting quarter, as per the average of the estimates of 15 brokerage firms. Estimates for the bottom line were in the range of INR 158.50 billion-INR 177.84 billion. Sequentially, the net profit is seen rising 1.7%.
"For HDFC Bank, moderation in loan growth (up 7.0% YoY and 1.3% QoQ) was largely on account of (a) shrinking non-individual book of e-HDFC as well as (b) the bank selling some part of its loan book (through pass-through certificates) to improve the LDR (loan-deposit ratio)," Nirmal Bang said in its report. In the previous quarter, the bank beat market estimates and reported a net profit of INR 161.74 billion. The bottom line was aided by a fall in provisioning and an improvement in margins.
As per provisional figures, the bank's gross advances were up 7% on year at INR 25.19 trillion as on Sept. 30 and deposits were up 15.1% on year at INR 25.00 trillion. With these numbers, the loan-to-deposit ratio would stand at 100.8%, much lower than the 108.4% reported a year ago and 104.53% a quarter ago. While announcing the numbers for Apr-Jun, the bank's management had said it aimed to bring down this ratio to the pre-merger levels of 80-85%.
"HDFC Bank anticipates steady profitability, with an estimated RoA/RoE of 1.8%/14.6% by FY26, driven by improved operating leverage, margin recovery, and disciplined credit growth management," Motilal Oswal said in a pre-earnings report.
The bank is scheduled to detail its earnings on Saturday.
In a report, Emkay Global said that slower credit growth and elevated operating expenditure, as the bank continues to build franchisee, could keep earnings in check. HDFC Bank has trimmed its loan book to bring down its credit-deposit ratio, as the Reserve Bank of India has been increasing regulatory pressure for banks to do so in order to avoid liquidity management issues in the future.
For Jul-Sept, the bank's net interest income is expected to rise 10.4% on year to INR 302.27 billion, as per the average of the estimates of 15 brokerages. On quarter, it is seen rising only 1.3%. The net interest margin of the bank is expected to remain broadly stable, reports said.
In the previous quarter, the bank's core net interest margin on total assets improved to 3.47% from 3.44% a quarter ago, and the net interest margin based on interest-earning assets rose to 3.66% from 3.63% in Jan-Mar.
"NIM is expected to recover gradually, and we estimate NIM to stabilise at 3.5-3.6% by FY26 as the mix of high-yielding retail assets grow and high-cost borrowings are replaced," Motilal Oswal said in its pre-earnings report.
The asset quality of the bank is expected to remain stable or improve sequentially. Prabhudas Lilladher expects the gross non-performing asset ratio to improve to 1.26% as on Sept. 30 from 1.33% as on Jun. 30, and the net NPA ratio to improve to 0.32% as on Sept. 30 from 0.39% as on Jun. 30. It also expects the provision coverage ratio to increase to 75% from 71.21% reported a quarter ago.
YES Securities expects slippages to remain stable on a sequential basis. The bank reported slippages of INR 79 billion. Excluding the slippages in agriculture loans, slippages stood at INR 61 billion, as per the bank's investor presentation for Apr-Jun.
At 1454 IST, shares of HDFC Bank were 0.7% higher at INR 1695 on the National Stock Exchange.
Following are the Jul-Sept earnings estimates for HDFC Bank, based on reports compiled by Informist from 15 brokerage houses:
| Brokerage firm | Net interest income (in INR million) | Net profit (in INR million) |
| Anand Rathi Share and Stock Brokers Ltd | 3,10,476.00 | 1,77,842.00 |
| Antique Stock Broking Ltd | 3,01,813.00 | 1,60,744.00 |
| Axis Securities Ltd | 3,02,100.00 | 1,65,190.00 |
| Dolat Capital Market Pvt Ltd | 2,97,819.00 | 1,60,017.00 |
| Elara Securities (India) Pvt Ltd | 3,00,020.00 | 1,61,021.00 |
| Emkay Global Financial Services Ltd | 2,98,846.00 | 1,63,458.00 |
| IDBI Capital Market Services Ltd | 2,99,664.00 | 1,63,124.00 |
| Kotak Institutional Equities | 3,00,662.00 | 1,62,405.00 |
| KR Choksey Research | 3,03,076.00 | 1,65,942.00 |
| Motilal Oswal Financial Services Ltd | 2,98,121.00 | 1,63,547.00 |
| Nirmal Bang Equities Pvt Ltd | 3,07,141.00 | 1,70,733.00 |
| Nomura Equity Research | 2,98,100.00 | 1,58,500.00 |
| Prabhudas Lilladher Pvt Ltd | 3,11,112.00 | 1,66,580.00 |
| Sharekhan Ltd | 3,00,790.00 | 1,62,280.00 |
| YES Securities (India) Ltd | 3,04,339.00 | 1,65,546.00 |
| Average | 3,02,271.93 | 1,64,461.93 |
| Number of responses | 15 | 15 |
End
Edited by Avishek Dutta
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