Q1 Results Preview: HDFC Bank likely to report 26% jump in Q1 net profit driven by strong loan growth

HDFC Bank — India's largest private sector lender — is all set to report its financial results for the April-June period on Monday, July 17. Analysts expect the banking behemoth to report a strong set of numbers driven by robust loan growth. This will be HDFC Bank's first earnings report since the completion of its mega merger with Housing Development Finance Corporation (HDFC).    

What to expect in HDFC Bank Q1 results

According to Zee Business research, HDFC Bank is estimated to report a standalone net profit of Rs 11,580 crore for the April-June period, which translates to a jump of 25.9 per cent compared with the corresponding period a year ago. The analysts expect its net interest income (NII) — or the difference between interest earned and interest paid — to expand 23.2 per cent on a year-on-year basis to Rs 24,000 crore.

Analysts expect HDFC Bank’s strong loan growth and stable credit cost to aid its financial performance, with some pressure on its net interest margin (NIM) — a key measure of profitability — amid a rise in provisions.

HDFC Bank’s net interest margin is pegged at 4.2 per cent for the first quarter of the current financial year, marking a decline of 10 basis points compared with the year-ago period, though the lender is expected to fare better than its peers, according to the research.

In a business update, released on July 5, HDFC Bank said its gross advances increased 15.8 per cent on a year-on-year basis to Rs 16,15,500 crore, as of June 30, 2023. Its deposits rose 19.2 per cent to Rs 19,13,000 crore, it said. 

Its current account and savings account (CASA) deposits increased 10.7 per cent and CASA ratio came down to 42.5 per cent from 45.8 per cent a year ago. 

The CASA ratio is the proportion of a lender’s deposits in current and savings accounts to its total deposits. A lower CASA ratio means a smaller portion of a bank’s total deposits are in low-cost accounts, translating to a higher cost of funds, and vice versa.

Asset quality

The lender’s asset quality — measured as the proportion of non-performing assets (NPAs) or bad loans to total loans — is estimated to be steady. According to Zee Business research, HDFC Bank’s gross NPAs are likely to come in at 1.1 per cent for the June quarter, as against 1.12 per cent for the previous three months. The analysts estimate its net NPAs to remain unchanged sequentially, at 0.27 per cent.

HDFC Bank shares: Past performance

HDFC Bank shares finished the June quarter 5.7 per cent stronger, underperforming gains of more than 10 per cent each in the Nifty and Nifty Bank indices.

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