India's largest private sector lender HDFC Bank is expected to report double-digit growth in profit, net interest income as well as pre-provision operating profit (PPoP) for the quarter ended June 2020.
According to brokerages, profit could grow in the range of 13-18 percent for the quarter compared to the corresponding period last fiscal supported by lower tax rate, but elevated provisions may limit growth in profitability.
Net interest income, the difference between interest earned and interest expended, is likely to increase 14-18 percent driven by strong 21 percent loan growth in June quarter 2020 YoY, while deposits growth was 25 percent YoY partly due to Yes Bank concerns.
"We expect loan growth to be strong but a cautious outlook on growth to continue. Retail loan growth may be optically slower due to weak volume growth in auto, while growth in the unsecured portfolio may remain strong," said Kotak Institutional Equities which sees profit growth of over 18 percent YoY and NII growth of 14 percent.
Asset quality may slightly weaken during the quarter on a sequential basis, while the provisions may remain elevated due to COVID-19.
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"We expect gross NPL ratio at 1.5 percent of loans, which is a marginal increase QoQ. We expect the moratorium number to be marginally higher than what was reported in Q4. The bank is likely to build a contingent provision for any slippage due to the lockdown," said Kotak Institutional Equities which sees 42 percent YoY increase in provisions.
Emkay Global also said, "Since the bank did not make material COVID-19 provisions in Q4, we expect it to make higher provisions in Q1. Slippages to be lower QoQ, though the bank may see some agri slippages from the KCC book."
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