HDFC Q1 preview: Analysts see up to 50% rise in PAT, dip in provisions

At a time when the non-banking finance company (NBFC) sector is in a deep distress, HDFC is likely to standout when it reports its June quarter results for 2019-20 (Q1FY20) on Friday, August 2, analysts say. This, they believe, will be possible due to an improvement in assets under management (AUM) and a stable asset quality. On an average, analysts see the housing finance company report up to 50 per cent rise in the net profit (PAT) for the recently concluded quarter.

Analysts at ICICI Securities, for instance, peg the PAT at Rs 3,257.5 crore, up 49 per cent YoY from Rs 2,190 crore seen in the corresponding quarter of 2018. The same was Rs 2,861.6 crore in the March quarter of fiscal year 2018-19 (Q4FY19).

“Led by higher other income of Rs 2,301 crore, largely one-time gain of Rs 1,895 crore from stake sale in Gruh Finance, HDFC is expected to report a strong growth in PAT of 49 per cent YoY to approximately Rs 3,258 crore,” they wrote in their earnings preview note.

Edelweiss Securities, however, expects a higher PAT at Rs 3,433 crore, up nearly 57 per cent YoY, on the back of one-time gain from stake sale in Gruh Finance. Net interest income (NII) is pegged to grow flat sequentially, but up to 20 per cent on yearly basis to Rs 3,462 crore in the June quarter from Rs 2,890 crore in the year ago period.

“HDFC is likely to improve spreads to help maintain net interest margins (NIMs) closer to 3 per cent levels despite sustenance of heavy liquidity on balance sheet,” say analysts at Prabhudas Lilladher.

LOAN DISBURSAL AND ASSETS UNDER MANAGEMENT

Slim competition and tight liquidity conditions in the market are expected to have benefitted HDFC in the recently concluded quarter. The NBFC extended loans worth Rs 7,230 crore in Q1FY20, as against loans worth Rs 2,400 crore in Q4FY19.

“HDFC was able to manage the liquidity situation well this quarter… We expect 2.8 per cent/13.3 per cent QoQ/YoY AUM growth,” analysts at Motilal Oswal Financial Services wrote in an earnings preview note. They expect the mix of retail and corporate lending to remain largely stable in this quarter.

Analysts see double-digit loan growth in this quarter on consolidated corporate loan book and strong credit growth under individual segment.

“Individual disbursement growth is likely to be strong (taking advantage of weakening competition) and we anticipate individual loan growth to be in high teens. That said, there could be softness on non-individual growth,” say analysts at Edelweiss Securities. 

Growth in advances is pegged at 15 per cent YoY, from Rs 3.72 lakh crore (Q4FY19) to Rs 4.27 lakh crore. ICICI securities, however, see the loan growth tad bit higher at Rs 4.31 lakh crore.

Motilal Oswal Securities, however, advises investors to watch out corporate loans and movement in spreads and margins on individual loans.

NON-PERFORMING ASSETS

Provisions are likely to come down on YoY basis, down 6 per cent from Rs 4,758 crore in Q1FY19 to Rs 4,472.5 crore in Q1FY20, brokerages say.

The GNPA ratio is likely to come in at 1.12 per cent, down only 5 basis points and 6 bps from 1.17 per cent reported in Q1FY19 and 1.18 per cent in Q4FY19. The GNPA loans at the end of Q1FY19 were Rs 4,409 crore.