HDFC Bank Q4 Preview: Net Profit Likely To Grow 56% YoY; Credila Stake Sale To Fuel Earnings

The largest private sector bank in India, HDFC Bank, will release its financial results today for the quarter that ended on March 31, 2024. Over the years, HDFC Bank has continuously produced strong return ratios, earnings growth, and stability in its asset quality and margins through a variety of credit and interest rate cycles.

For the quarter under review, the analysts are expecting the bank to report 56.9% YoY/15.5% QoQ growth in its net profit in the base case scenario, with a possibility of a -10.0% deviation as per KRChoksey Research.

Net interest income (NII) is likely to grow by 23.7% YoY/ 1.5% QoQ triggered by a 55.4% YoY/ 1.6% QoQ growth in advances, the analysts of KRChoksey Research said.

The brokerage anticipates the cost-to-income ratio to be 38.2% as against 40.3% in Q3FY24, led by higher operating income. In the base scenario, we have assumed PPOP will grow by 61.0% YoY/ 26.8% QoQ, driven by the 90.0% stake sale of its subsidiary, Credila, during the quarter, KRChoksey Research further added.

Axis Securities said in a report that HDFC Bank's margins are likely to remain stable sequentially whereas stable Opex ratios and support from stake sale to non-interest income are expected to keep PPOP growth healthy. On the asset quality, the brokerage believes in a stable outlook; while credit costs are expected to be slightly lower QoQ.

Commenting on the margin outlook of the bank, BOB Capital Markets said HDFC Bank increases TD rates to focus more on deposit growth which also aids in meeting credit demand but likely puts pressure on margin. On the deposit front, the research analyst of BOB Capital Markets said, loan & deposit growth seems healthy on a sequential basis, wherein deposits outpace loan growth resulting in some cooling in the C/D ratio. Focus on retail deposit mobilisation is likely to boost deposit growth.

On the asset quality front, the brokerage is expecting a minor improvement in GNPA and NNPA with controlled slippages.

HDFC Bank Share Price Target

"The stock currently trades at 2.1x/1.8x its FY2025E/FY2026E core BV estimates. We believe loan growth is expected to be in low mid-teens in the near term and deposit growth should outpace loan growth by atleast 300-400 bps, which should help the CD ratio to normalise gradually. We retain a Buy rating on the stock with an unchanged price target (PT) of Rs. 1,900, as valuations are reasonable and have priced in all the barring factors that could weigh down earnings trajectory of the merged entity. We remain constructive on the stock from medium to long-term perspective. Key monitorable remains NIM progression and retail deposit mobilisation," said Sharekhan in a report.

Disclaimer

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