Asset quality has remained healthy over past several quarters, and the trend is likely to continue, Motilal Oswal said, adding that asset quality in the corporate loan book would be a key monitorable
Housing finance major HDFC is likely to report double-digit growth in net profit, net interest income and operating profit with healthy asset quality.
The stock, which is known to be a defensive, gained 3.5 percent year to date but corrected 8 percent during the quarter ended September 2018 due to weak market conditions after NBFC and HFC debt crisis.
HDFC is expected to report profit growth in the range of 12-29 percent on one-time stake sale in AMC and likely consistent strong growth in net interest income and operating income. Elevated provisions may limit some bottomline growth.
Axis Capital and Kotak Securities see the highest profit growth at 29 percent YoY while Emkay Research expects a 12 percent rise in bottomline.
"No major surprise on asset quality front and stake sale of AMC will result in one time gain," Axis Capital said.
Net interest income, the difference between interest earned and interest expended, is expected to grow in the range of 12-28 percent YoY on healthy loan growth and stable margin.
"Loan growth is likely to be healthy at 15-17 percent YoY with stable margin. Rise in cost of borrowings would be cushioned by a rise in lending rates," said Axis Capital which expects NII growth at 15 percent.
Emkay Research, which expects 12 percent growth in NII, said HDFC's loan growth may remain largely steady, but incrementally large part of growth is likely to come from non-individual loans. "NIMs may remain largely stable. Trend in sanctions in the affordable housing segment will be crucial for future growth trends."
Prabhudas Lilladher, which expects the maximum NII growth at 28 percent, said NIMs may improve with lower sequential base and stable yields on account of increase rates which should rightly offset cost pressure.
Motilal Oswal estimates AUM growth at 19 percent YoY, in line with the trend in the prior quarters. It expects pick-up in corporate loan growth to sustain.
Asset quality is expected to improve YoY as well as sequentially, brokerage houses said.
Asset quality has remained healthy over past several quarters, and the trend is likely to continue, Motilal Oswal said, adding that asset quality in the corporate loan book would be a key monitorable.
According to Prabhudas Lilladher, gross non-performing assets may fall 46 bps sequentially and 42 bps YoY to 0.72 percent.
Provisions may be elevated QoQ but brokerage houses do not see major concern from the same.
Motilal Oswal expects provisions at Rs 30 crore against Rs 19.7 crore in Q1FY19 and Rs 95 crore in Q2FY18 while Prabhudas Lilladher expects provisions to decline 1.1 percent YoY and increase 376.8 percent QoQ to Rs 93.9 crore in the quarter ended September 2018.
"We maintain higher provisions as reported Stage 3 have stood higher," Prabhudas Lilladher said.
Brokerage houses expect operating profit growth in the range of 10-27 percent YoY.
Key issues to watch out for
> Ind-AS impact on earnings
> Treasury management going forward
> Loan growth and uptick in corporate loans> Movement in spreads and margins (on individual loans)