As the announcement of its September quarter results approaches, HDFC Bank’s share price is under scrutiny. On Monday, the largest private sector lender in the country, HDFC Bank, is slated to reveal its financial performance for the second quarter of FY24 on October 16, 2023.
This marks the maiden quarterly financial report for HDFC Bank following its merger with the mortgage lender, Housing Development Finance Corporation (HDFC), which became effective on July 1.
In Q2FY24, it is expected that HDFC Bank will see an increase in net profit, alongside growth in net interest income (NII). However, the bank is anticipated to grapple with a significant margin contraction subsequent to the merger.
The surplus liquidity generated could potentially impact HDFC Bank’s net interest margin in Q2FY24. Nevertheless, analysts believe that margins are likely to rebound in H2FY24 as credit growth gains momentum and liquidity is deployed.
In its quarterly business update, HDFC Bank reported a robust 57.7% surge in gross advances, reaching ₹23.54 lakh crore as of September 30, 2023, compared to ₹14.93 lakh crore the previous year. Deposits also increased, totaling around ₹21.73 lakh crore in Q2FY24, reflecting a growth of approximately 29.9% over ₹16.73 lakh crore as of September 30, 2022.
Motilal Oswal Financial Services foresees HDFC Bank’s margins moderating sequentially, with controlled loan growth. Asset quality for the merged entity is anticipated to improve, while margins are expected to soften sequentially.
The brokerage projects HDFC Bank’s net profit to expand by 39.4% YoY to ₹14,780 crore, while NII is projected to rise by 33.6% YoY to ₹28,090 crore. The bank is also expected to post an operating profit of ₹22,790 crore, reflecting a 31% increase YoY.
Analysts at Prabhudas Lilladher anticipate a 6 bps QoQ improvement in Gross NPAs, reducing the figure to 1.34%, and they expect provisions to remain stable.
They note, “Creation of excess liquidity could affect Q2FY24 NIM, although margins should bounce back in H2FY24E as credit growth picks up and liquidity is utilized. While core earnings growth would be muted for FY24E (3.5% YoY), as NIM and loan growth normalize, core PAT may witness a 20.7% CAGR over FY24-26E.”
HDFC Bank’s share price has experienced a decline of over 5% year-to-date (YTD) and has fallen more than 6% in the past month.
On Friday, HDFC Bank shares concluded 0.85% lower at ₹1,536.75 apiece on the BSE.
