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HDFC Bank, one of India‘s leading private sector lenders, is set to kickstart the earnings season for the banking sector with its Q4 results. Analysts expect the bank’s net profit to rise by 21% YoY to INR 12,180 crore, driven by healthy loan growth and continued traction in business across segments. In this article, we’ll take a closer look at HDFC Bank’s Q4 performance, key monitorables, and what it means for the banking sector.
Strong Loan Growth to Drive Topline Performance
HDFC Bank’s provisional numbers indicate that advances grew by 17% YoY to INR 16 lakh crore as of March-end. Domestic retail loans grew by around 21% YoY, commercial and rural banking loans grew by 30%, and corporate and other wholesale loans grew by 12.5%. Meanwhile, deposits grew at a faster pace than loans, with retail deposits rising by 23.5% YoY and wholesale deposits growing by 10%. Overall, HDFC Bank’s net interest income is expected to grow by 33% YoY to INR 25,050.4 crore.
Profitability Outlook Not That Rosy
While the topline performance is expected to be strong, the profitability outlook is not that rosy. Brokerage ICICI direct expects margins to be stable at 4.1%, while some see it flat. On the asset quality front, Kotak Institutional Equities expects gross non-performing asset ratio to be stable sequentially, led by lower slippages (<2%), better recovery, and strong loan growth outlook. ICICIdirect has pegged the bank’s GNPA ratio at 1.21% for the quarter and NNPA at 0.32%. It expects provisions to be elevated at INR 3,361 crore, building in HDFC Ltd merger buffers.
Key Monitorables
Investors will be closely watching the following key monitorables in HDFC Bank’s Q4 results:
Outlook for Loan Growth and Deposits
The outlook for both loan growth and deposits will be closely watched against the backdrop of the interest rate scenario.
Growth in Credit Cards Business and Way Forward
Investors will be keen to know the growth trajectory of HDFC Bank’s credit cards business and its way forward.
Margin Trajectory for FY24
Investors will also be looking for guidance on HDFC Bank’s margin trajectory for FY24.
Commentary on Asset Quality
Investors will be closely monitoring HDFC Bank’s commentary on asset quality, particularly in light of the COVID-19 pandemic.
Update on the Timeline of the Merger of HDFC Ltd
Investors will be looking for an update on the timeline of the merger of HDFC Ltd with HDFC Bank.
Conclusion
HDFC Bank’s Q4 results are eagerly awaited by investors and are expected to be strong. While loan growth is likely to drive the topline performance, the profitability outlook is not that rosy. Investors will be closely watching key monitorables such as the outlook for loan growth and deposits, growth in credit cards business, margin trajectory for FY24, commentary on asset quality, and the timeline of the HDFC Ltd merger.