HDFC Bank Q4: Analysts see 25% YoY jump in PAT; guidance key monitorable

HDFC Bank Q4 preview: Just when India Inc was getting back on its feet, coming out from the Covid-19 pandemic-led disruption, the second wave of infections is making analysts wary of the recovery. Hence, when HDFC Bank reports its March quarter results (Q4FY21) on Saturday, April 17, all eyes would be on the management’s growth outlook.

Analysts at Kotak Institutional Equities would focus on near-term growth recovery and segments that would be drive this growth. They are factoring-in a 6 per cent quarter-on-quarter (QoQ) decline in net profit, at Rs 8,218.6 crore, on the back of a 0.3 per cent dip in operating profit at Rs 15,135.7 crore. Both the parameters, however, would be 18.6 per cent and 16.8 per cent higher, respectively on a year-on-year (YoY) due to low base effect.

In Q3FY21, HDFC Bank had reported as net profit of Rs 8,758.3 crore (Rs 6,927.7 crore in Q4FY20) and an operating profit of Rs 15,186 crore (Rs 12,958.8 crore in Q4FY20).

On the upside, those at Motilal Oswal Financial Services peg the lender’s PAT at Rs 8,690 crore, up 25.4 per cent YoY, but down 0.7 per cent QoQ. The operating profit, meanwhile, is pegged at Rs 15,560, up 20 per cent YoY.

Loan book and interest income

In a Q4 business update, the private lender announced that its advances aggregated to approximately Rs 11,320 billion as of March 31, 2021, a growth of around 13.9 per cent over Rs 9,937 billion as of March 31, 2020, and a growth of around 4.6 per cent over Rs 10,823 billion as of December 31, 2020.

The bank’s deposits grew 16.3 per cent at approximately Rs 13,350 billion as of March 31, 2021 as compared to Rs 11,475 billion year-on-year (YoY) and a growth of around 5 per cent quarter-on-quarter (QoQ).

Despite a moderated YoY growth, HDFC Bank continues to outperform industry, resulting in market share gain, note analysts at ICICI Securities.

“The bank is pushing retail loan growth (up 5 per cent QoQ/7.5 per cent YoY), which is clearly seen in lower interest rates and various offers in gold loan, vehicle loan and personal loans. With net interest margins (NIMs) at 4.2-4.3 per cent, we estimatenet interest income (NII) growth of 12-14 per cent YoY for Q4FY21,” they said in an earnings preview report.

In absolute terms, the brokerage estimates NII at Rs 16,970 crore, up from Rs 15,204.1 crore reported in Q4FY20 and Rs 16,317.6 crore in Q3FY21.

A slightly higher estimate by Prabhudas Lilladher anchors the NII at Rs 17,578.2 crore.

Provisions and asset quality

Analysts remain divided on the quantum of provisions that the bank may set aside during the quarter under review. While one school of thought nudged the analysts to believe that the bank may lower its provisioning due to improved economic situation, the other makes them believe that the bank may remain cautious as localized lockdowns are being imposed in the country.

Those at ICICI Securities and KIE expect the bank’s provisions to jump 36 per cent and 32 per cent QoQ while Prabhudas Lilladher forecasts 8.6 per cent sequential dip. Thus the provisions estimates are in the range of Rs 3,122.1 crore to Rs 4,650 crore.

Provisions in the year-ago period stood at Rs 3,784.5 crore and at Rs 3,414.1 crore in Q3FY21.
As regards gross NPA ratio, ICICI Securities sees it at 1.8 per cent while Prabhudas Lilladher sees it at 1.27 per cent. It was 1.3 per cent and 0.8 per cent in Q4FY20 and Q3FY21, respectively.
Net NPA ratio, meanwhile, is pegged at 0.6 per cent.

Kotak Institutional Equities expects gross NPL ratio to rise led by higher slippages from the retail and SME portfolio. But commentary on the book is likely to be positive, it said.