HDFC Bank pares opening gains; brokerages upbeat despite higher provisioning in Q4

HDFC Bank share price: Shares of the private lender HDFC Bank started the session on a positive note even as the lender posted a lower-than-expected profitability for Q4 amid higher provisioning. At 9:17 am, shares of the private lender were trading weak by 0.6 per cent at Rs 1522.15. For the January-March quarter, the lender reported a standalone net profit of Rs 16500 crore versus Rs 16400 crore as reported in the December quarter.

Reuters analysts' estimated profit to come in at Rs 17300 crore, according to the LSEG data for the period under review.

Importantly, the lender merged with its parent company HDFC in July, meaning its results are not comparable on a year-over-year basis.

Provisions and contingencies were 135.1 billion rupees during the quarter, up from 42.17 billion rupees in the three months to December "as a countercyclical buffer for making the balance sheet more resilient," the bank said in a press release.

The lender also on the sidelines of its results recommended a dividend of Rs 19.5 per share of Rs  1/- each fully paid up (i.e. 1950 %) out of the net profits for the year ended March 31, 2024, subject to the approval of the shareholders at the ensuing Annual General Meeting (“AGM”) of the Bank. The record date for determining the eligibility of members entitled to receive dividends on equity shares is Friday, May 10, 2024. 

What global brokerages suggest post HDFC Bank’s Q4 earnings?

Nearly all foreign brokerages have given their thumbs up to the stock after its Q4 earnings. Jefferies as well as Goldman Sachs have given a ‘buy’ call on the counter with a raised target price. Jefferies noted that Q4 profit at the lender of Rs16,500 crore came in below estimates, but Pre-provision operating profit (PPOP)had been inline & adj. for one-offs. EPS was at Rs 21 & ROA was at 1.9%. A key positive as suggested by the brokerage has been a slight rise in NIMs. Deposit growth was strong at 17% (merger adj.), but loan growth lagged at 12%, it added.