HDFC Bank Q3 profit could rise 20%; asset quality could be stable

HDFC Bank is likely to continue to report over 20 percent growth in profit as well as net interest income year-on-year (YoY) with stable asset quality and a slight increase in provisioning due to IL&FS quarter-on-quarter (QoQ), analysts said.

“Bank should continue to deliver stable 20 percent YoY earnings growth on stable margins and loan growth. Other income could improve on treasury gains,” Prabhudas Lilladher said, adding provisions could be slightly higher despite MTM gains as the bank could likely have exposure on IL&FS and could make provisions on the same.

Emkay said cost ratios will largely remain under current levels and that is structurally positive for return on assets. “Slippages to be similar to Q2; the impact of farm loan waiver on crop loans will be largely visible in Q4, while on Term Loans will be visible in Q3 itself.”

Loan growth is expected to remain healthy at 25 percent YoY, driven by retail loans, while deposit growth is also likely to pick up to around 24 percent YoY, led by an increase in CASA and retail bulk deposits, according to Motilal Oswal.
“Asset quality is expected to remain stable, with GNPA at 1.3 percent. We estimate profit after tax to be at Rs 5,640 crore,” an analyst at the firm wrote in their report.

Key issues to watch out for would be whether the management indicates some stress in SME and retail book; trends in digital banking/payments and various initiatives; overall balance sheet growth outlook and economic recovery, the research house said.

The stock has gained around half a percent in the past three days. At the close of market hours, HDFC Bank was quoting at Rs 2,131.20, up Rs 2.15, or 0.10 percent, on the BSE.

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