Q4 review: Will HDFC shine in last quarter of FY17?

The Housing Development Finance Corp (HDFC) will be announcing its fourth quarter ended March 31, 2017 result on Thursday. 

Stock price of HDFC ended Wednesday at Rs 1,561.20 per piece on BSE, down Rs 22 or 1.37%.

HDFC has registered strong performance in previous three quarters of financial year 2016-17 (FY17). During Q3FY17, HDFC saw 12% growth in its net profit to Rs 1,701 crore compared to Rs 1,521 crore a year ago similar period. Net Interest Income (NII) rose by 17% to Rs 2,769 crore versus Rs 2,363 crore of Q3FY16.

The company in the Q3 performance statement stated that gross non-performing loans in the quarter amounted to Rs 2,341 crore, marginally higher than in the second quarter. This is equivalent to 0.81% of the loan portfolio.

Nilesh Parikh Kunal Shah Prakhar Agarwal of Edelweiss Financial Services said, "Loan growth will likely be in 12-14% range. While funding cost benefit will play out, however pressure on yields henceforth will normalise NIMs. Asset quality trend will likely be benign."

While analysts at Motilal Oswal estimates asset under management (AUM) growth of 16%, marginally below the growth in the prior quarter. We expect growth to be driven by the retail segment. 

With largely stable margins, NII are expected to be good. Also Cost-to-income ratio will remain largely stable. 

Motilal further said, "Asset quality has remained healthy over past several quarters, and the trend is likely to continue. Asset quality in the corporate loan book would be a key monitorable. We estimate provisions of Rs 118 crore, as against Rs 117 crore in 3QFY17 and Rs 95 crore in 4QFY17 (excluding special provision). "

Overall Motilal expects HDFC's net profit to be at Rs 1,986.7 crore declining by 23.8% year-on-year (YoY) but up by 16.78% on quarter-on-quarter (QoQ) basis. While NII is seen at Rs 2,853.4 crore growing by 15.55% yoy and 10.79% qoq.