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HDFC Bank Q3 earnings preview: Here’s what to watch out for

Loan growth is expected to remain healthy at 25 per cent year-on-year, driven by retail loans.

, ETMarkets.com|
Updated: Jan 19, 2019, 12.18 PM IST
HDFC Bank Q3 results today: Here is what to expect
HDFC Bank Q3 results today: Here is what to expect
NEW DELHI: Private lender HDFC Bank is set to release its October-December quarter earnings on Saturday.

While investors and market experts will keenly study the numbers, they will also try to trace any stress in small to medium enterprise (SME) and retail books to assess the future prospects of the bank.

However, the bank looks poised to register a decent growth, brokerages said.

"Loan growth is expected to remain healthy at 25 per cent year-on-year (YoY), driven by retail loans, while deposit growth is also likely to pick up to nearly 24 per cent YoY, led by an increase in CASA and retail bulk deposits," said brokerage Motilal Oswal Securities.

Asset quality is also expected to remain stable, in line with the second quarter, while the GNPA can come around 1.3 per cent, the brokerage said.

Most structural drivers, including asset quality, market share gains, operating efficiency and the expansion in branch network looks in place for HDFC Bank, paving the way for its growth in future as well.

For the third quarter, Motilal Oswal Securities expects the bank to report a 21 per cent YoY growth in PAT at Rs 5,640 crore.

Net interest income (NII) is expected to grow and so is other income segment, which includes non-fund-based banking activities.

NII is expected to grow at nearly 20 per cent YoY, while calculated margins are likely to stay flattish at 4.3 per cent, the brokerage said, adding, that other income growth is expected to pick up at nearly 16 per cent YoY, factoring in an improved treasury performance due to moderation in bond yields and healthy fee income.

Operating expenditure (Opex) may remain well below the total income growth, resulting in a better pre-provision operating profit (PPOP) growth.

"Opex growth at 11 per cent YoY is likely to trail total income growth at about 19 per cent YoY, aided by the bank's strong digital initiatives, leading to PPoP growth of nearly 25 per cent YoY,” said the brokerage.

Kotak Institutional Equities has broadly similar views on HDFC Bank's third-quarter numbers.

The brokerage expects NII growth to be nearly 5 per cent sequentially and 20 per cent yearly, whereas adjusted PAT may grow by 10 per cent sequentially and 18.6 per cent YoY.

Brokerage Elara Capital is slightly upbeat on these numbers. The brokerage said the adjusted net profit for the bank may jump by 17 per cent sequentially and 26.1 per cent YoY to around Rs 58,543 crore.

The profitability of banking sector, as a whole, might have improved during the December quarter, thanks to traction in the pace of credit expansion and a better loan pricing power and considering the weak financial condition of NBFCs.

Better loan pricing power is expected to enhance the margin of banks and HDFC Bank, being one of the largest private lenders of the country, looks on track.

However, the market will still read the growth in credit costs, trends in digital banking and overall growth outlook of the bank when it comes out with third-quarter numbers.
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