HDFC Bank Q1 results preview: Profit may grow between 16-20% YoY; commentary on moratorium eyed

Private lender HDFC Bank is likely to post double-digit growth in net profit and net interest income (NII) on a year-on-year (YOY) basis in first quarter earnings. The lender is slated to announce its quarterly numbers on Saturday, July 18.

In general, there are hopes that the true picture of banks’ asset quality in Q1FY21 will be masked by the loan moratorium as this will rein in slippages. Credit costs are likely to stay elevated as banks build further contingent buffers to protect their balance sheets from Covid-19 downside risks.

However, an assessment by Edelweiss Securities shows 20.30 per cent YoY growth in net profit for HDFC Bank on 23.60 per cent growth in pre-provision operating profit (PPOP).

Market participants should zero-in on the loan growth and the trend in the book under moratorium. Any loan growth above industry implies continued market share gain.

Sharekhan sees 18.70 per cent YoY growth in profit after tax (PAT). However, it believes bottomline figures may fall 4.60 per cent on QoQ basis. Net interest income and PPOP are likely to see a growth of 14.10 per cent and 12.10 per cent YoY, respectively, during the quarter gone by.

“We expect loan growth to be strong, but a cautious outlook on growth to continue. Retail loan growth may be optically slower due to weak volume growth in auto, while growth in the unsecured portfolio may remain strong,” the brokerage said, adding the bank may choose to build a contingent provision buffer for FY21.

Shares of HDFC Bank advanced nearly 24 per cent to Rs 1,065.70 on June 30 from Rs 862 on March 31, while the benchmark BSE Sensex gained 18.48 per cent during the same period. The scrip traded 1.19 per cent higher at Rs 1,075 in the afternoon trade on July 17.

BOB Capital Markets sees 16.60 per cent, 13.90 per cent and 16.70 per cent YoY rise in PAT, PPOP and NII for HDFC Bank.

“Market share gains continue and loan growth trends remain robust. Margins are likely to remain stable. Commentary on asset quality should revolve around share of loans under moratorium and contingent provisions built by the bank,” BOB Capital Markets said.

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