HDFC Bank Q1 results preview: Soft growth in loans, deposits to limit NII, profit gain QoQ

HDFC Bank 1907

HDFC Bank, India's largest private sector lender, is likely to show robust annual growth in profit and net interest income (NII) for the April-June quarter (Q1FY25), following its merger with the HDFC a year ago. However, analysts cautioned that moderate sequential growth in loans and deposits might constrain both profit and NII growth to single digits on a quarter-on-quarter (QoQ) basis.

The lender is slated to announce its Q1FY25 results on July 20, 2024.

According to an average estimate of 8 brokerages, HDFC Bank's NII is pegged to grow up to 27 percent YoY to Rs 29,621 crore in Q1FY24 from Rs 23,352 crore in the year-ago period. On the other hand, the lender's profit is estimated to jump by 32 percent YoY to Rs 15,905 crore in Q1FY25 as against Rs 12,047 crore a year back.

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However, sequentially, HDFC Bank's NII is projected to grow by just 2 percent, while profit is expected to rise by 3 percent, showed Moneycontrol poll. Analysts attribute this modest growth to sluggish deposit and advances accretion during the quarter.

Flat margins: Analysts estimate net interest margins (NIMs) to remain flat on a QoQ basis at 3.5 percent in Q1FY25 and contract by up to 60 basis points from 4.1 percent in Q1FY24 due to higher funding costs.

Sluggish deposit or advances growth: In its Q1FY25 business update, HDFC Bank's advances dropped 0.8 percent QoQ to Rs 24.8 lakh crore primarily due to the reduction of low-yielding corporate loans. Deposits stood flat at Rs 23 lakh crore on a QoQ basis.

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Stable asset quality: Motilal Oswal analysts expect asset quality to remain stable, with net non-performing assets (NNPAs) projected to stay flat at 0.3 percent in the June-ended quarter, while gross NPAs are expected to be at 1.2 percent.

Going forward, analysts at ICICI Securities highlight that HDFC Bank's stock re-rating will depend on the progress of deposit and loan growth as well as the margin trajectory. They forecast an ~18 percent YoY growth in deposits and ~13 percent YoY loan growth for FY25.

Other factors to monitor include management's commentary on margin outlook and the impact of priority sector lending in FY25.

The stock of this private lender has surged over 16 percent during the April-June period, beating benchmark Nifty 50's 12 percent rise during the same period.