HDFC Bank was trading flat at Rs 1,671 on January 16 morning ahead of the December quarter results.
India’s biggest private sector lender is expected to report a mixed set of numbers, with strong credit growth driving net interest income (NII) but higher cost of funds weighing on profitability and margins.
In the past three months, the stock surged over 9 percent against a 0.06 percent dip in Bank Nifty. The stock touched a 52-week high of Rs 1,757 on July 3, 2023.
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According to a Moneycontrol poll, HDFC Bank's NII is expected at Rs 28,846 crore, up from Rs 27,385 crore in the previous quarter. Net profit is pegged at Rs 15,910 crore, down from Rs 15,976 crore in the previous quarter. The year-on-year (YoY) figures are not comparable owing to the merger of HDFC Ltd.
The rising cost of deposits or borrowing costs (around 24-25 percent QoQ) is expected to dent the net interest margin (NIM) profile of HDFC Bank amid lower interest income, analysts said. NIM is expected to contract 10 basis points (bps) to 3.6 percent from 3.7 percent in Q2FY24.
One basis point is one-hundredth of a percentage point.
ALSO READ: HDFC Bank Q3 NII may grow 5% QoQ, deposit costs to hit margins
Mayuresh Joshi, Head of Equity Research, William O’Neil India, said higher cost of funds may bottom out from the second half of the next fiscal year once rate cuts begin. This will bring relief to not just HDFC Bank but the entire banking space, he said.
He suggested keeping an eye on margins over the next two quarters amid changing cost of funds. “Sequentially, we believe margins will be witness less sharper decline when compared from a yearly basis. With the merger of HDFC with HDFC Bank, we expect client pool, asset base, and cost or revenue synergies to get fit eventually," Joshi told Moneycontrol.
They expect a steady December quarter from HDFC Bank, he added.
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