HDFC Bank On Path For Exponential Growth: Decoding Q3 Results, Here's What Investors Should Know!

The largest Indian bank in terms of market share, HDFC Bank has declared its Q3 earnings for FY24. The quarterly results were robust with double-digit growth in PAT and net interest income. Net profit of the lender beat Street's estimates. Also, deposits and advances recorded a strong upside. However, asset quality had a mixed trend with gross NPA inching up year-on-year, but net NPA easing further. This will be the second quarter since the merger of HDFC with HDFC Bank. Expert believes HDFC Bank is on the path of exponential growth.

Shreyansh V. Shah, Research Analyst, StoxBox said, "Net profit beats market estimates; On the path of exponential growth" on HDFC Bank earnings.

Here are the hits and misses of HDFC Bank Q3 results cited by Shah:

- Net Interest Income stood at Rs. 28,471 crores in Q3FY24, up 4.0% QoQ / up 23.9% YoY.

- Pre-provision operating profit (PPOP) stood at Rs. 23,647 crores in Q3FY24, up 4.2% QoQ / 24.3% YoY, missing market estimates marginally of Rs. 23,700 crores.

- Provisions rose significantly to Rs. 4,217 crores in Q3FY24, up 45.2% QoQ / 50.3% YoY. Provisions have increased due to Rs. 1,220 crores of contingent provisions regarding investment in AIFs under the RBI Circular dated 19 December 2023.

- The bank's quarterly net profit of Rs. 16,373 crores in Q3FY24 surpassed market expectations of Rs. 16,016 crores.

- NIM remained stable sequentially at 3.6% in Q3FY24. However, there was compression of 50bps on a YoY basis.

- Gross NPA stood at 1.26% in Q3FY24, down 6bps QoQ / up 3bps YoY.

- Net NPA stood at 0.31% in Q3FY24, down 4bps QoQ/ down 3bps YoY.

- Capital Adequacy Ratio stood at 18.4% in Q3FY24, down 115bps / up 73bps YoY. This was mainly due to the increase in the risk-weight assets on unsecured and other loans.

- Gross Deposits stood at Rs. 22,13,977 crores in Q3FY24, up 1.9% QoQ / up 27.7% YoY. The bank's savings account deposits stood at Rs. 5,79,900 crores, current account deposits at Rs. 2,55,800 crores, and time deposits stood at Rs. 13,78,300 crores.

- Gross Advances stood at Rs. 24,46,076 crores in Q3FY24, up 4.9% QoQ / 62.3% YoY.

- CASA ratio improved and stood at 37.7% in Q3FY24, up 10bps QoQ / down 630bps YoY.

- HDB Financial Services Ltd., the NBFC arm of the bank, reported a net revenue of Rs. 2,350 crores in Q3FY24, a growth of 5.0% YoY. Furthermore, the lending company's PAT stood at Rs. 640 crores, showing a healthy growth of 27.1% YoY.

- HDFC Life Insurance Company Ltd., the life insurer subsidiary of the bank, reported a Total Premium Income of Rs. 15,530 crores in Q3FY24, showcasing a growth of 6.5% YoY. The PAT stood at Rs. 370 crores, up 15.8% YoY.

- HDFC Ergo General Insurance Company Ltd. reported a PAT of Rs. 130 crores in Q3FY24, up 6.2% YoY.

Shah added, "India's largest private sector lender, HDFC Bank Ltd., reported decent Q3FY24 results, with net profit beating market estimates. Amidst the NIM compression experienced by the banking industry, the private lender managed to sustain it on a sequential basis. Though the bank took a hit in its capital due to higher risk weights on unsecured loans, we believe that growth in unsecured loans has been modest."

With the aim of the bank to have over 13,000 branches in the next three to five years, Shah said, "We remain optimistic about building momentum on deposit growth in the long run. This will improve its CASA ratio going forward. Due to the bank's legacy of healthy credit profiling, we do not see any further deterioration in its asset quality and expect it to be stable. Also, due to the bank's vast branch network, its subsidiaries can access large cross-selling opportunities, thus indirectly supporting the topline growth. Thus, our outlook remains positive in the medium to long term."

HDFC Bank's share price will react to Q3 numbers on Wednesday. In the previous session, HDFC Bank shares surged by 0.42% to end at Rs 1,678.95 with a market cap of Rs 12,74,740.22 crore.

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