HDFC Bank Q3 preview: In a steady quarter, analysts expect NIM to expand

HDFC Bank Q3FY24 result preview: India's largest private sector bank, HDFC Bank, may see a flattish quarterly earnings performance in the December quarter as the lending behemoth manages merger synergies.
 

According to analysts, HDFC Bank's net profit growth may come in anywhere between -1.6 per cent and 1.3 per cent quarter-on-quarter (Q-o-Q) as against a profit of Rs 15,976.1 crore in Q2FY24. 
 

Net interest income (NII), on the other hand, is projected to rise around 7 per cent Q-o-Q from Rs 27,385.2 crore reported in the September quarter of FY24.
 

The numbers are not comparable year-on-year (Y-o-Y) due to its merger with HDFC Ltd effective July 1, 2023. HDFC Bank is scheduled to report its Q3 results on Tuesday, January 16, 2024. 
 

"We should have a better comfort on some of the moving variables this quarter. Key variables to watch would be steady state of cost of funds (reversal of ICRR to normalcy this quarter), and yield on loans," said analysts at Kotak Institutional Equities in their results preview report.
 

Here's what key brokerages expect from HDFC Bank's Q3FY24 results:

BNP Paribas

The brokerage pegs net profit for the quarter under study at Rs 15,747.4 crore, down 1.4 per cent Q-o-Q. The lender's previous year profit, ex-HDFC Ltd's PAT, stood at Rs 12,259.5 crore. 
 

Operationally, it expects NII to increase by 7.2 per cent Q-o-Q to Rs 29,350.8 crore, and pre-provision operating profit (PPOP) to grow by 9.2 per cent to Rs 24,788.1 crore.

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"CASA growth at 9.5 per cent Y-o-Y and 2.2 per cent Q-o-Q, up 10bps to 37.7 per cent, continues to be healthy in the context of the weak CASA environment, indicating market share gains by HDFC Bank. Total deposits growth stood at 27.7 per cent Y-o-Y and 1.9 per cent Q-o-Q. Gross advances growth at 16 per cent Y-o-Y (comparable basis) and 4.9 per cent Q-o-Q was healthy, led by its commercial and rural banking (CRB) segment. Retail segment growth was marginally below expectations," the brokerage noted.
 

ICICI Securities

This brokerage, too, expects net profit to slip 1.4 per cent Q-o-Q to Rs 15,724.7 crore, but NII to rise 7 per cent Q-o-Q to Rs 29,292.4 crore.
 

It, however, sees net interest margin (NIM) expanding 7bps to 3.47 per cent vs 3.40 per cent Q-o-Q. NIM was 4.10 per cent in Q3FY23. 
 

Slippages are also seen declining 10.3 per cent sequentially to Rs 7,000 crore from Rs 7,800 crore in the September quarter. On a yearly basis, it would be an increase of 6 per cent from Rs 6,600 crore. 
 

Kotak Institutional Equities

The brokerage sees a 76-per cent Q-o-Q hit on treasury income as bond yields stayed elevated during the quarter. It pegs the income at Rs 250 crore vs Rs 1,041 crore in Q2FY24. 
 

Loan-loss provisions, on the other hand, may slip around 5 per cent from the September quarter to Rs 2,770 crore from Rs 2,903.8 crore.
 

The brokerage sees NIM at 3.5 per cent. 
 

Equirus Research

It expects a paltry 0.5 per cent Q-o-Q dip in Q3FY24 PAT at Rs 15,901 crore. However, its forcast stands lower for NII at Rs 28,665.7 crore (up 4.7 per cent sequentially), and PPOP at Rs 23,945.5 crore (up 5.5 per cent Q-o-Q).


 

It expects NIM to rise 10 bps over the September quarter to 3.5 per cent.
 

"Key things to watchout would be updates on trends post merger, and strategy to improve the credit-to-deposit ratio," it said.
 

KR Choksey

Holding an optimistic view, this brokerage forecasts a 1.3 per cent quarterly rise in net profit at Rs 16,180.7 crore for the December quarter. NII and PPOP growth estimates, however, stays at around 7 per cent Q-o-Q each.
 

"Higher liquidity on the books is expected to result in a slight decrease in NIM on the operational front Q-o-Q. The cost-to-income ratio is expected to be around 40.2 per cent, as against 39.6 per cent in Q3FY23. For the quarter, we expect the asset quality to remain stable," it said in its preview report.