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HDFC Bank Q3 preview: Loan growth could rise 20% YoY, NIM may slip a bit

At a time when credit growth has slumped to over 2-year low of 7.1 per cent year-on-year (YoY), private sector lender HDFC Bank is expected to report double-digit loan growth for the December quarter of the current fiscal (Q3FY20). Besides, analysts expect the bank’s net profit to jump up to 32 per cent year-on-year (YoY) to Rs 7,379 crore.

The lender, which is slated to report its Q3FY20 earnings on Saturday, January 18, has underperformed at the bourses during the quarter under review. Between October and December 2019, shares of the bank gained 4.45 per cent, as against a 6.8 per cent rise in the benchmark Nifty50 index. Nifty Bank index, on the other hand, advanced over 11 per cent during the period.

Analysts at Prabhudas Lilladher expect the bank to report a net profit of Rs 7,379 crore, up 32 per cent YoY during the period on the back of full tax benefit. Sequentially, the number will be 16.3 per cent higher from Rs 6,345 crore logged in Q2FY20. During Q3FY19, the net profit stood at Rs 5,585.9 crore.

A lower estimate by Phillip Capital; however, pegs the net profit at Rs 6,737.1 crore, up 21 per cent YoY. Besides, they see the pre-provision profit at Rs 11,682.8 crore, up 8.4 per cent YoY, but down 0.1 per cent quarter-on-quarter (QoQ). The Pre-provision operating profit (PPoP) was Rs 11,698 crore and Rs 10,778 .4 crore in Q2FY20 and Q3FY19, respectively.


For the October-December quarter, the net interest margin (NIM) is seen slipping by 10 basis points (bps) YoY, but remaining flat QoQ, from 4.3 per cent in Q3FY19 to 4.2 per cent in Q3FY20.

“Cut in marginal cost-based lending rate (MCLR) is likely to weigh on NIM during Q3FY20...While core revenue momentum is likely to be 16–18 per cent, NIMs would be steady at 4.2–4.3 per cent,” wrote analysts at Edelweiss Securities.

The Mumbai-headquartered bank had cut its MCLR on loans for all tenors by up to 15 bps in December, and by 10 bps in November, 2019.

Net interest income (NII); however, is likely to grow between 11 and 16 per cent YoY to Rs 14,409.5 crore, up from Rs 12,576.8 crore reported in the same quarter last year, and Rs 13,515 crore in the previous quarter of the current fiscal.


“Led by the aggressive festive campaign, HDFC Bank is set to maintain its superior credit growth compared to the industry and increase market share. Credit and deposit growth is seen growing at 20 per cent and 25 per cent YoY to Rs 9.34 lakh crore and Rs 10.68 lakh crore, respectively,” wrote analysts at ICICI Securities in an earnings preview note.

Slightly weaker growth in corporate loan-book could off-set better credit off-take by retail borrowers, bringing the overall loan growth at Rs 9.28 lakh crore (up 18.9 per cent YoY and 3.5 per cent QoQ), say analysts at Prabhudas Lilladher.

On the asset quality front, analysts, on an average, expect the gross non-performing asset (GNPA) ratio to rise marginally by 5 basis points (YoY and QoQ) from 1.38 per cent to 1.43 per cent, while the net NPA (NNPA) ratio is seen flat at 0.4 per cent.

Analysts at Phillip Capital estimate the slippages to come in at Rs 4,500 crore, up 12.5 per cent YoY from Rs 4,000 crore reported in Q3FY19. Sequentially, it would be a rise of 21.2 per cent from Rs 3,714 crore posted in Q2FY20.

Meanwhile, Prabhudas Lilladher sees provisions rising 17.5 per cent YoY to Rs 2,597.5 crore from Rs 2,211.5 crore reported in Q3FY19. It would, however, be a 3.8 per cent decline on a sequential basis from Rs 2,700.7 crore reported in Q2FY20, the brokerage added.

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