HDFC, Kotak Mahindra Bank surge 2% ahead of Q4FY18 results; Know what analysts say

Two major financial service providers Kotak Mahindra Bank and Housing Development Finance Corp (HDFC) will be presenting their fourth quarter, ended March 2018, results anytime on Monday. Ahead of the result, investors showed positive reaction in these two companies as their stock price surged by nearly 2% each on stock exchanges. 

After touching an intraday high of Rs 1,889.80 per piece on BSE, the share price of HDFC was trading at Rs 1,881.85 per piece above Rs 24 or 1.29% at around 1216 hours. 

At the same time, the share price of Kotak was trading at Rs 1,201.95 per piece on BSE, higher by Rs 13.40 or 1.13%. The bank has touched an intraday high of Rs 1,208.50 per piece. 

Let’s have a look of what analysts are expecting for Q4FY18 performance in these two companies. 

HDFC 

Analysts at Prabhudas Lilladher said, “Loan growth to be better led by retail, while non‐retail should soften on higher base of demonetization, while spreads should be steady.” 

They added, “Asset quality to see slight improvement, while company to make high provisions from sale of assets.”

Similar opinions were from Phillip Capital and Axis Capital. Analysts here stated that, loan growth driven by retail loans, corporate segment to be driven by LRD.  Spread to remain stable as decline in cost would be offset by decline in yields.  Asset quality to remain stable.

IDBI Capital said, “We expect loan growth of 18%  NII growth will lag loan growth attributable to pressure on spreads  Sharp qoq dip in PAT on expected lower treasury profits (Rs37bn in Q3FY18).”

In previous quarter, HDFC surpassed analysts' estimate by clocking over three times rise in its standalone net profit. The company posted standalone net profit of Rs 5,670.21 crore in Q3FY18, rising by a whopping 233.30% compared to Rs 1,701.21 crore in the corresponding period of the previous year.

Kotak Mahindra Bank 

Talking on overall banking system, IDBI Capital said, “Banks especially PSU Banks are expected to report significant weak earnings during the quarter. Modest loan growth, pressure on NIMs, weak treasury income and higher credit cost will impact the earnings.”

While Phillip Capital said, “Asset quality to remain under pressure, as slippages from restructured loans continue to flow.”

As for Kotak, analysts at Prabhudas said, “Strong recovery in earnings to continue with improved base of loan growth.” 

Also these analysts  believe, banks will report much stable asset quality trends. Further, Subs like Prime and securities earnings to be slightly softer.

Axis Capital said, “Loan growth to be strong driven by select segments, while margin will stay resilient. Management commentary on key subsidiaries will be keenly watched.”

Following these, Kotak’s Q4FY18 PAT is expected to come at Rs 1,204.3 crore, with Net Interest Income (NII) at Rs 2,498.9 crore. Prabhudas sees gross NPA easing down to 2.19% in Q4FY18 versus 2.31% in Q4FY17. 

In Q3FY18, Kotak  surpassed analysts estimates, by witnessing nearly 20% rise in it's standalone net profit. The  posted standalone net profit of Rs 1,053.21 crore in Q3FY18, rising by 19.71% from Rs 879.75 crore in the corresponding period of the previous year. Q3FY18 net profit was also up by 5.92% from Rs 994.31 crore in the preceding quarter.

Therefore, due to strong performance in previous quarter, HDFC and Kotak have found favour in the eyes of investors, as they are once again expected to post good Q4FY18 quarter.