What to expect from merged HDFC Bank’s Q1 report

This will be the lender’s first result after its merger with HDFC Ltd, effective from July 1, and will keep analysts glued to the management’s earnings growth guidance for the merged financial behemoth.

The merged entity of HDFC Bank is set to report its April-June quarter (Q1) result for financial year 2023-24 (FY24) on Monday, July 17.

“We expect business growth to see continuous traction, led by healthy growth across segments. Margins are likely to stay stable, while deposit traction will be in focus. Business growth and earnings trajectory post-merger with HDFC will be key monitorables,” said an earnings preview report by Motilal Oswal Financial Services.

At the bourses, shares of HDFC Bank advanced close to 6 per cent on the BSE during the three months under study, as against a 10-per cent gain in the benchmark S&P BSE Sensex. The S&P BSE bankex index, meanwhile, surged 13 per cent during the period, ACE Equity data shows.

Q1 business update

Earlier in July, HDFC Bank had informed the exchanges that the merged entity’s combined loan book expanded by 13.1 per cent year-on-year (YoY) to Rs 22.45 trillion at the end of Q1FY24. The deposits, on the other hand, grew by 16.2 per cent YoY to Rs 20.63 trillion.

On a pro-forma basis, the merged entity had net profit of Rs 60,348 crore in the 2022-23 financial year (FY23).

Meanwhile, on a standalone basis, HDFC Bank’s advances rose by 15.8 per cent YoY to approximately Rs 16.15 trillion as of June 30, 2023. Its deposits were up by 19.2 per cent to Rs 19.13 trillion as of June 30, 2023.

Against this backdrop, brokerages have put out standalone (excluding HDFC Ltd) estimates for HDFC Bank:

Nomura

The brokerage has pegged HDFC Bank’s standalone net profit at Rs 11,220 crore, down 7 per cent sequentially from Rs 12,047.5 crore reported in Q4FY23. On a YoY basis, the PAT is expected to grow 22 per cent from Rs 9,196 crore clocked in Q1FY23.

It, further, expects net interest income (NII) to stay unchanged on a QoQ basis at Rs 23,390 crore from Rs 23,350 crore. This would, however, be 20 per cent higher from Rs 19,480 crore seen in Q1FY23.

Credit costs could rise to 1 per cent from 0.7 per cent QoQ, while return on assets (RoA) may slip to 1.8 per cent from 2 per cent.

BNP Paribas

This brokerage has an aggressive estimate of Rs 12,476 crore as the lender’s Q1 profit, up 36 per cent YoY and 4 per cent QoQ.

NII, too, it suggests, may increase 23 per cent YoY/2.5 per cent QoQ to Rs 23,930 crore.

ICICI Securities

Analysts here forecast a 9 per cent QoQ drop in HDFC Bank’s Q1FY24 standalone net profit to Rs 10,995.3 crore. Pre-provision profit, too, could slip 1 per cent to Rs 18,399.6 crore, while NII may rise just 4 per cent QoQ to Rs 24,266.2 crore.

Prabhudas Lilladher

It expects NII and PAT to stay unchanged from the March quarter, but rise 21 per cent and 31 per cent, respectively, on a yearly basis to Rs 23,491.5 crore and Rs 12,051.3 crore.

Net Interest Margin (NIM) contraction of 3bps QoQ is likely due to calibration in loan book/interest income and higher retail growth.

GNPAs, it said, could see an uptick of 9bps QoQ to 1.21 per cent. Provisions may rise by 4.3 per cent QoQ/down 12.2 per cent YoY to Rs 2,800 crore due to agri slippages.

Kotak Institutional Equities

It expects NIM to decline 5 per cent QoQ. Besides, it estimates gross non-performing asset (GNPA) ratio to be stable QoQ led by lower slippages (less than 2 per cent) and better recovery (expect a bullish commentary of the situation on the ground).

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