HDFC Bank Q4: PAT may rise up to 40% YoY on robust loan book, say analysts

HDFC Bank Q4 preview: A solid 21 per cent loan growth and subdued provisions are likely to drive HDFC Bank's March quarter (Q4FY22) net profit, expect analysts. The lender will report its Q4 result on Saturday, April 16, and is likely to report profit after tax (PAT) growth of up to 40 per cent year-on-year.

According to Prabhudas Lilladher's estimates, HDFC Bank's net profit could come in at Rs 11,503.6 crore for the quarter under review, up 40.5 per cent as against Rs 8,186.5 crore reported in Q4FY21. Sequentially, this would be a rise of 5 per cent over Rs 10,342.2 crore logged in the December quarter of FY22 (Q3FY22). The lowest profit estimate by Motilal Oswal Financial Services, however, pegs the value at Rs 9,690 crore, a growth of about 18.5 per cent YoY and contraction of 6.3 per cent QoQ.

Pre-provision operating profit, meanwhile, is expected to rise in the range of 11 to 19.5 per cent YoY, up to Rs 18,568.3 crore. It was Rs 15,532.8 crore in Q4FY21 and Rs 16,776 crore in Q3FY22.

This, analysts say, will be driven by 15.5 per cent to 18.5 per cent YoY growth in net interest income (NII) owing to 21 per cent YoY expansion in the lender's loan book. In absolute terms, NII is seen coming in anywhere between Rs 19,380 crore and Rs 20,282 crore. NII was Rs 17,120.1 crore in the year-ago quarter and Rs 18,443.5 crore in Q3FY22. Net interest margins (NIM) is seen stable around 4-4.2 per cent for the quarter.

"We expect NII growth of 15 per cent YoY led by solid loan growth of around 20 per cent YoY to drive HDFC Bank's profit. Operating profit growth at 12 per cent YoY, however, on account of lower non-interest income growth may cap upside," noted analysts at Kotak Institutional Equities.

According to the lender's Q4 business update, HDFC Bank's loan book expanded by around 20.9 per cent growth on YoY basis to Rs 13.69 trillion in FY22. The outstanding loan book was Rs 11.32 trillion as of March 31, 2021. The growth in advances was around 8.6 per cent over Rs 12.60 trillion as of December 31, 2021.

On the liabilities side, the bank's deposits grew by 16.8 per cent to approximately Rs 15.59 trillion as of March 31, 2022 as Rs 13.35 trillion a year ago. The growth in deposits was around 7.8 per cent over Rs 14.45 trillion as of December 31, 2021.

HDFC Bank's non-interest income is expected to take a hit due to lower treasury income, which is seen at Rs 477 crore. It was Rs 655.1 crore in Q4FY21 and Rs 1,046.5 crore in Q3FY22.  

Asset quality and provisions

Analysts at Kotak Institutional Equities expect gross non-performing asset (GNPA) ratio to be lower led by lower slippages (at 1.6 per cent), better recovery, and strong loan growth. Those at Prabhudas Lilladher, on the other hand, expect provisions to come down as PCR remains strong at 72 per cent.

The latter pegs provisions at Rs 3,189.1 crore relative to Rs 4,693.7 crore in Q4FY21 and Rs 2,994 crore in Q3FY22. GNPA ratio is projected at 1.51 per cent as against 1.32 per cent YoY and 1.26 per cent QoQ.

"Asset quality in Agri/Unsecured book, slippages, and commentary around credit cards and fee income traction will be the key monitorables," said MOFSL.