HDFC Bank extends gains post June quarter result; stk surges 9.5% in 4 days

The stock was up 5% to Rs 1,153 after the lender reported 20 per cent year on year growth in net profit at Rs 6,659 crore for April-June quarter (Q1FY21) supported by operational income

Shares of HDFC Bank soared 5 per cent to Rs 1,153 on the BSE on Monday after the lender reported 20 per cent year on year (YoY) growth in net profit at Rs 6,659 crore for the April-June quarter (Q1FY21), supported by operational income. The stock of the private sector bank has rallied 9.5 per cent in the past four trading days.

Net interest income (interest earned less interest expended) for Q1FY21 grew by 17.8 per cent YoY to Rs 15,665 crore from Rs 13,294 crore logged in the quarter ended June 30, 2019, driven by growth in advances and deposits. The net interest margin for the quarter remained flattish at 4.3 per cent.

“Substantial exposure to top rated corporates, adequate provisioning coupled with lower moratorium at 9 per cent, provides comfort on bank’s ability to face any delinquency shock post moratorium period”, ICICI Securities said in a note.

On the asset quality front, absolute GNPA increased 9 per cent quarter on quarter (QoQ) as slippages were elevated at 1.2 per cent (annualized). As the bank used an analytical tool to determine slippages, it resulted in a more expedited recognition of NPAs. Thus, GNPA ratio increased 10bps QoQ to 1.4 per cent, the management said in a statement.

HDFC Bank has been able to deliver its usual earnings growth trajectory. However, the Covid-19 pandemic has induced volatility on certain operating parameters like fee income and opex, believe analysts. This in turn has heavily dented loan origination across retail segments.

"Overall performance of the bank should remain steady and we expect the bank to offset near-term pressure on other income via tight control over opex. We expect HDFCB’s strong liability franchise and fixed rate nature of the book to support margins even as it maintains higher liquidity to navigate through the crisis,” analysts at Motilal Oswal Financial Services said in results update.

On the asset quality front, slippages are likely to pick up during 2HFY21 due to the Covid-19 disruption, which could keep credit costs elevated. However, higher provisioning buffers should limit the overall impact on earnings. CEO succession remains an important event in the near term and a key monitorable, the brokerage firm said.

At 09:51 am, HDFC Bank was trading 4 per cent higher at Rs 1,142 on the BSE, as compared to 1 per cent rise in the S&P BSE Sensex. A combined 14.4 million equity shares had changed hands on the counter on the NSE and BSE till the of writing of this report.