India's largest private sector lender HDFC Bank is expected to deliver double-digit growth in profit and net interest income with stable asset quality and declining provisions for the quarter ended December 2021.
The stock price of HDFC Bank on January 14 gained more than a percent ahead of its quarterly earnings. It has already registered more than 8 percent gains since the recent low on December 20, underperforming the benchmark index Bank Nifty and Nifty50 that gained more than 11 percent and 9 percent, respectively, in the same period.
Earlier this month, HDFC Bank announced its provisional business numbers, saying advances grew by 16.4 percent year-on-year and 5.1 percent quarter-on-quarter to Rs 12.6 lakh crore with retail loan growth at 13.5 percent YoY (up 4.5 percent QoQ) and corporate loan book growth at 7.5 percent YoY (up 4.5 percent QoQ).
The bank further said it registered 13.8 percent YoY growth (up 2.8 percent QoQ) in deposits at Rs 14.46 lakh crore with CASA deposits rising 24.6 percent YoY (up 3.5 percent QoQ) to Rs 6.81 lakh crore in December 2021 quarter. "CASA ratio stood at around 47 percent as of December 31, 2021, as compared to 43 percent as of December 2020 and 46.8 percent as of September 2021."
"Net interest income growth is seen at 12.7 percent YoY. We expect margins to be stable at 4.3 percent," said ICICI Direct.
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Kotak Institutional Equities expects NII growth at around 14 percent YoY led by loan growth. "Operating profit growth at around 12 percent YoY on account of lower non-interest income growth. We expect NIM unchanged at around 4 percent."
In the six month period ended September 2021, the bank had recorded profit growth of 16.88 percent year-on-year at Rs 16,564 crore and net interest income grew by 10.3 percent to Rs 34,693 crore in the same period.
Sequentially, the asset quality improved in September quarter with gross non-performing assets as a percentage of gross advances falling to 1.35 percent (against 1.47 percent in June quarter) and net NPAs declining to 0.4 percent (against 0.48 percent). Experts expect the stable asset quality with declining provisions in December 2021 quarter.
"Asset quality is expected to remain steady and gross non-performing assets at 1.3 percent. We expect provision to decline to Rs 3,528 crore. Thus, PAT growth is seen at 14 percent YoY," said ICICI Direct.
Kotak Institutional Equities expects gross non-performing loans (NPL) ratio to decline led by lower slippages (2 percent) and better recovery (expect a bullish commentary of the recovery environment). "Near-term focus would be on growth recovery, segments that would drive this growth and margin outlook," says the brokerage which sees 17.2 percent YoY growth in profit.
Asset quality, slippages, and commentary around credit cards and fee income traction are key things to watch out for.
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