Earnings Outlook
Muted loan growth, high provisions to limit HDFC Bank's Oct-Dec PAT
This story was originally published at 09:51 IST on 21 January 2025
Register to read our real-time news.Informist, Tuesday, Jan. 21, 2025
By Kshipra Petkar
MUMBAI – Muted loan growth and rising provisions will likely limit the profitability of HDFC Bank Ltd. for the quarter ended December. The bank's net profit is seen rising 1.7% on year to INR 166.47 billion for the quarter ended December from INR 163.73 billion a year ago, according to the average of estimates from 16 brokerages. Sequentially, the bottom line is seen falling 1%.
The bank reported a net profit of INR 168.21 billion in Jul-Sept. Brokerage Nomura Equity Research said that the bank's profit is seen lower due to higher tax expended in the base quarter. The largest private sector bank will detail its Oct-Dec earnings Wednesday.
KR Choksey Research in its pre-earnings report said that in the base scenario, they assume the pre-provisioning operating profit will grow 5.1% on year and 0.6% on quarter, primarily led by operating income. It also said that the bank's non-interest income will likely increase 6.2% on year in the reporting quarter.
For Oct-Dec, net interest income of the bank is seen rising 7.5% on year to INR 306.13 billion. Sequentially, it is seen rising 1.7%, as per the average of estimates from 16 brokerages. "We anticipate a 7.8% YoY and 1.9% QoQ growth in net interest income (NII). This growth is expected to be driven by the continued deployment of higher-cost borrowings," KR Choksey said in its report.
The net interest margin for Oct-Dec is expected to remain stable. Brokerage Motilal Oswal and Nomura in their pre-earnings reports said they see margins moderating for the reporting quarter due to a fall in credit-deposit ratio, weaker current account and savings account deposits, and higher growth in corporate loans. Analysts expect a positive outlook for the medium term on the progress of margins from the bank's management. The bank's margin for Jul-Sept was at 3.46% on total assets.
According to the provisional figures released by the bank, the gross advances rose 3% on year and the deposits rise 15.8% on year as of Dec. 31. The growth in loans and deposits is in line with the bank's vision to bring down their credit-to-deposit ratios to pre-merger levels of 80-85%. As of Sept. 30, the bank's credit-deposit ratio was 99.8%.
Time deposits grew around 22.7% on year and 4.6% on quarter to INR 16.91 trillion. The current accounts and savings accounts deposits rose 4.4% on year to INR 8.73 trillion as of Dec. 31. However, these fell 1.2% on quarter, as per the provisional data. During the quarter ended Dec. 31, the bank assigned loans of INR 216 billion as a strategic initiative, the data showed.
The bank's retail loans grew around 10% on year and commercial and rural banking loans grew around 11.5%, while corporate and other wholesale loans fell 10.3%, as of Dec. 31. On an average basis, the private sector lender's advances under management were up 7.6% on year at INR 26.28 trillion for the quarter ended December.
Asset quality of the bank is expected to remain broadly stable. As of Sept. 30, the gross non-performing asset ratio stood at 1.36% as compared to 1.33% reported a quarter ago. The net non-performing asset ratio stood at 0.41% as of Sept. 30 compared to 0.39% a quarter ago. The bank's provisions are expected to rise marginally or remain stable on a sequential basis.
Analysts expect the slippages to be either stable or rise. Brokerage Nuvama Wealth has estimated that slippages are expected to rise 5.1% on quarter and 17.1% on year to INR 82 billion in Oct-Dec. In the previous quarter, the slippages were INR 78 billion. "Asset quality may see another steady print, reflected in curtailed slippages, Q3 (Oct-Dec) should see higher slippages on quarter given KCC (kisan credit card) quarter," Elara Securities said in its report. Nomura expects the credit costs to remain contained at nearly 0.5%.
At 0941 IST, shares of HDFC Bank traded 0.13% higher at INR 1653.45 on the National Stock Exchange.
Following are the Oct-Dec earnings estimates for HDFC Bank based on reports from 16 brokerage firms in descending order by the estimate of net profit:
| Brokerages | Net Interest Income (in INR million) | Net Profit (in INR million) |
| Anand Rathi Share and Stock Brokers Ltd | 3,12,367.00 | 1,72,519.00 |
| YES Securities (India) Ltd | 3,08,667.00 | 1,72,323.00 |
| Emkay Global Financial Services Ltd | 3,04,907.00 | 1,71,034.00 |
| Systematix Shares and Stocks (India) Ltd | 3,08,687.00 | 1,70,425.00 |
| Nuvama Wealth Management Ltd | 3,05,700.00 | 1,69,000.00 |
| Nirmal Bang Equities Pvt Ltd | 3,07,828.00 | 1,68,093.00 |
| Elara Securities (India) Pvt Ltd | 3,08,876.00 | 1,67,458.00 |
| Axis Securities Ltd | 3,07,780.00 | 1,67,370.00 |
| IDBI Capital Market Services Ltd | 3,05,036.00 | 1,67,044.00 |
| KR Choksey Research | 3,06,969.00 | 1,66,779.00 |
| Motilal Oswal Financial Services Ltd | 3,03,356.00 | 1,66,449.00 |
| Nomura Equity Research | 3,05,400.00 | 1,66,200.00 |
| Kotak Institutional Equities | 3,09,921.00 | 1,65,908.00 |
| Sharekhan Ltd | 3,07,270.00 | 1,62,640.00 |
| Prabhudas Lilladher Pvt Ltd | 3,05,849.00 | 1,60,973.00 |
| JM Financial Institutional Securities Pvt Ltd | 2,89,427.00 | 1,49,328.00 |
| Average | 3,06,127.50 | 1,66,471.44 |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Tanima Banerjee
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