With HDFC Bank all set to announce its fiscal third quarter earnings on Wednesday (January 22), brokerage firms and analysts said that the banking major is expected to post 8.1-8.4 per cent growth in its Q3 Net Interest Income (NII). The NII range is seen between Rs 30,778 crore and Rs 30,887 crore. Experts said that HDFC Bank is expected to report a subdued quarter with a single-digit profit growth during Q3FY25, weighed down by modest loan growth and stagnant margins
According to a Moneycontrol poll, HDFC Bank is expected to record Q3 net profit at Rs 16,650 crore and NII is estimated at Rs 30,690 crore during the quarter in review. Further, another poll by Bloomberg stated that HDFC Bank is set to report profit at Rs 16,596 crore.
Earlier in a regulatory filing on December 16, HDFC Bank had said, “We wish to inform you that a meeting of the Board of Directors of HDFC Bank Limited is scheduled to be held on Wednesday, January 22, 2025 to inter-alia consider and approve the unaudited standalone and consolidated financial results of the Bank for the quarter and nine months ending December 31, 2024. We also wish to inform you that the window for trading in securities of the Bank shall remain closed from Wednesday, December 25, 2024 to Friday, January 24, 2025 (both days inclusive) for the designated employees and their immediate relatives pursuant to the Bank’s share dealing code.”
What are key expectations?
HDFC Bank, per its Q3 business update, recorded a 3 per cent YoY loan growth as it concentrated on improving its loan-to-deposit ratio (LDR). Deposits, meanwhile, grew by 16 per cent YoY to Rs 2.5 lakh crore. Elara Capital said HDFC Bank is expected to post softer momentum in loan growth. The brokerage firm said, “The bank, as per some media articles, seems to have sold down its portfolio, which will impact loan growth. The key to watch will be deposit traction and the composition in the form of ‘retail and others’.”
The Bank’s Net Interest Margin (NIM) is projected to remain flat at 3.6 per cent as the management focused on reducing its credit-to-deposit (CD) ratio below 100 per cent following its merger with HDFC Ltd. Elara Capital said, “Expect broadly steady NIMs, but the interplay within LDR, LCR and NIMs will be the key monitorable.” YES Securities too maintained that HDFC Bank’s NIM will be stable sequentially.
YES Securities, while maintaining that HDFC Bank will see a flattish trend in provisions, said, “Sequential loan growth will be in the 2.5 per cent ballpark due to the idiosyncratic growth trajectory. NII growth will be in-line with average loan growth as the rise in yield on advances to be in tandem with rise in cost of deposits. Consequently, NIM will be stable sequentially. Sequential fee income growth will broadly match loan growth. Opex growth would slightly lag business growth. Slippages would be broadly stable on a sequential basis. Provisions will be stable on a sequential basis.” Per the brokerage firm, HDFC Bank is expected to post NII at Rs 30,866.70 crore, up 8.4 per cent YoY and profit for the period is estimated at Rs 17,232.30 crore, up 5.3 per cent.
Axis Securities said that HDFC Bank’s deposit growth will be better than credit growth as LDR improved marginally. Margins for the quarter are likely to remain stable QoQ with a slight positive bias, it said. Slippages are expected to remain under control with stable asset quality. Per the brokerage firm, HDFC Bank is projected to record NII at Rs 30,778 crore, up 8.1 per cent and net profit is estimated at Rs 16,737 crore, up 2.2 per cent YoY. “We expect our coverage universe banks to report stable to marginally lower NIMs, with SFBs witnessing sharper NIM compression while the larger private banks and PSU Banks reporting stable to a more calibrated decline in margins. Our undercoverage banks are expected to report at 9/2% YoY/QoQ NII growth during the quarter,” Axis Securities said.
Per Elara Capital, HDFC Bank is expected to post NII at Rs 30,887.60 crore, up 8.5 per cent and profit is estimated at Rs 16,745.80 crore, up 2.3 per cent. The loan book for the quarter is expected to be at Rs 2545.00 thousand crore, up 4 per cent YoY and deposits will stand at Rs 2560.10 thousand crore.
Here are things to watch out for as HDFC Bank will announce its Q3 earnings report on January 22:
– Investors will watch out for HDFC Bank’s near-term progression of margins. Per Axis Securities, the commentary on margin improvement trajectory is expected to be positive.
– Another monitorable will be guidance for credit growth and deposit growth, which could shape market expectations for subsequent quarters.
– HDFC Bank Q3 results announcement will also give an update on asset quality, which is expected to post steady print, reflected in curtailed slippages. Q3 should see higher slippages QoQ given the KCC quarter.