HDFC Bank Poised for Strong Q2 Results with Double-Digit Profit Growth

HDFC Bank, the largest weighted constituent in the Nifty index following its merger with HDFC, is anticipated to announce a significant 19-25 percent increase in net profit for the June quarter. This surge in profitability is expected to be driven by a notable 20 percent-plus rise in net interest income (NII), while net interest margin (NIM) is predicted to remain relatively flat on both a sequential and year-on-year (YoY) basis.

Analysts have observed that HDFC Bank is the only bank that has consistently outpaced credit growth with its deposit growth over the past four quarters. Consequently, market watchers will be paying close attention to any commentary on the progress of the merger with HDFC. As for the quarterly results, HDFC Bank has already reported advances worth Rs 16,15,500 crore in the June quarter, reflecting a 15.8 percent increase over the same quarter last year. This translates to a modest 0.9 percent sequential growth in advances compared to the previous quarter’s Rs 16,00,600 crore. In a recent business update in early July, HDFC Bank disclosed that its deposits reached Rs 19,13,000 crore as of June 30, representing a 19.2 percent rise over June 30, 2022. Deposits also experienced a 1.6 percent increase over March 31, 2023, amounting to Rs 18,83,400 crore.

ICICI Securities predicts that HDFC Bank will achieve a 19.6 percent YoY increase in net profit, amounting to Rs 10,995 crore, compared to Rs 9,196 crore from the previous year. They anticipate that NII will climb by 24.6 percent YoY to Rs 24,266 crore, up from Rs 19,481 crore in the corresponding period. NIM is expected to settle at 4.07 percent, slightly lower than 4.10 percent in March and 4 percent in the same quarter of the previous year. Nomura India, on the other hand, forecasts a profit of Rs 11,220 crore, indicating a 22 percent increase with a 20 percent YoY rise in NII to Rs 23,390 crore. Provisions are projected to rise by 12 percent to Rs 3,580 crore, a decline from the 31.9 percent YoY growth. NIM is anticipated to stabilize at 4.1 percent.

According to HDFC Bank’s internal business classification, its domestic retail loans experienced a 20 percent YoY growth and a 4 percent QoQ growth in the June quarter. Commercial and rural banking loans saw a 29 percent YoY growth or 2 percent sequential growth, while corporate and other wholesale loans increased by 11 percent YoY but declined by 1 percent QoQ, as stated in a business update provided by HDFC Bank.

Sharekhan expects HDFC Bank to achieve a profit of Rs 11,642 crore, marking a substantial 26.6 percent YoY increase. They also project NII to rise by 19.4 percent YoY to Rs 23,263 crore, while pre-provision operating profit is anticipated to reach Rs 18,095 crore, reflecting a 17.7 percent YoY growth. As of year-to-date figures, HDFC Bank shares have risen by 1.04 percent, slightly below the 3.74 percent increase in the Nifty Bank index. The stock holds an average price target of Rs 2,105, according to Trendlyne, suggesting a potential upside of 22 percent from the current price.

Overall, HDFC Bank is poised to deliver strong Q2 results, with robust double-digit growth in profit. The bank’s focus on deposit growth, along with its strategic merger with HDFC, positions it well for continued success in the market. Investors are optimistic about HDFC Bank’s upcoming results, as analysts predict substantial growth in net profit and net interest income. The bank’s consistent deposit growth outpacing credit growth has been a key factor in driving its success. With a strong performance expected, HDFC Bank continues to be a prominent player in the banking sector.