The country's second largest private sector lender HDFC Bank, on January 18, is expected to report more than 20 percent year-on-year growth in profit for the quarter ended December 2019, partly driven by lower tax cost.
NII, other income and pre-provision operating profit (PPoP) may also continue to support the bottomline, but higher loan loss provisions could impact the net growth.
Prabhudas Lilladher, which among brokerages, expects the maximum profit growth of 32 percent, said PAT would better on full tax benefit but likely lead to excess provisions towards likely increase in agri slippages, while non-agri stress should be stable.
The growth in net interest income, the difference between interest earned and interest expended, is likely to be in the range of 11-15 percent YoY due to slower loan growth of around 17-19 percent YoY for the quarter due to vehicle book.
"We expect loan growth to slow down to around 17 percent YoY resulting in slower NII growth at around 12 percent YoY. Retail loan growth slowdown is on account of weak volume growth in auto though the share of unsecured portfolio would remain high," said Kotak Institutional Equities which sees profit growth of 23 percent in Q3 YoY.
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Prabhudas Lilladher also said loan growth (up 19 percent) could be slightly weaker as last quarter corporate loan book supported while retail could be better on full festive benefit.
Brokerages largely expect the lender to keep net interest margin growth of over 4 percent sequentially and the other income growth could be in the range of 10-20 percent YoY.
Narnolia, which sees NII growth of 11 percent YoY with moderation of loan growth and lower yield on advances and 25 percent profit growth, said other income may grow 14 percent with fee income growth of 18 percent YoY.
Fee income growth (up 14 percent YoY) from MFs will be slower YoY due to changes in regulations while asset and payment fees will grow at a slower rate, Kotak said.
Most brokerages expect the asset quality to weaken marginally QoQ during the quarter due to agri exposure, but overall it remain under control.
"We expect gross NPL ratio at 1.5 percent of loans, which is a marginal increase QoQ. The bank is likely to utilize the contingent provisions for any slippage from the corporate portfolio," Kotak said.
Narnolia also feels the asset quality is expected to be moderately affected due to the seasonal slippages from the agri segment.
Key things to watch out for would be growth in credit costs especially from rural loans, pick up in loan book growth and any development on succession planning.
Brokerages remained bullish on the stock and it is one of their top picks among banks. The stock rallied 3.6 percent during the quarter and gained more than 20 percent in last one year.