HDFC Bank Q4 preview: Asset quality to remain steady, NIM seen improving

Fee income and credit quality of the agri-portfolio will be the key monitorables in the bank's Q4 earnings numbers

Private lender HDFC Bank is set to release its March 2019 quarter (Q4FY19) earnings on Saturday and most brokerage firms expect the bank to continue its healthy growth and profitability. While Edelweiss expects a 20.5 per cent year-on-year (YoY) gain in the bank's net profit at Rs 5,886.6 crore, analysts at ICICI Securities see a 22.5 per cent YoY growth at Rs 5,877 crore.

Fee income and credit quality of the agri-portfolio, they say, will be the key monitorables in the bank's Q4 earnings numbers. 

Analysts at Edelweiss believe HDFC Bank's loan growth would track above industry growth, implying continued market share gains. "However, the system-wide slowdown in deposit growth will stretch out CD (credit-deposit) ratios," Edelweiss said.

Advances are likely to remain healthy and net interest margin (NIM) is set to improve during the period under review.

"Advances growth to remain healthy at 24.5 per cent YoY, led by a balanced mix of corporate as well as retail. Growth in unsecured retail advances (credit cards and personal loans) to remain robust," ICICI Securities said, adding that a hike in deposit rate would be offset by an increase of 5 basis points (bps) in MCLR (), thereby keeping margins stable at 4.2-4.3 per cent.

HDFC Bank's net interest income (NII) is likely to grow 6.9 per cent quarter-on-quarter (QoQ) to Rs 13,445.2 crore, according to ICICI Securities, while Edelweiss sees a 5.4 per cent growth in NII plus other income QoQ to Rs 17,941.4 crore.

As for asset quality, Edelweiss expects it to remain benign. "Asset quality to remain steady with gross non-performing assets (GNPA) at Rs 11,403 crore, agri portfolio to remain under watch," said ICICI Securities, adding that the bank's net non-performing assets may grow 9 per cent QoQ to Rs 3,422 crore.

In terms of pre-provision operating profit (PPOP), Edelweiss sees a 22 per cent YoY increase at Rs 10,819 crore, a 0.4 per cent hike QoQ.

At the bourses, HDFC Bank has outperformed the benchmark Nifty50 index in the last one year (as of Tuesday's close) as the stock has risen over 18 per cent against nearly 12 per cent rise in the Nifty50 index. However, Nifty Bank index has gained around 21 per cent during the same period.