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HDFC Bank, India’s largest private lender, is expected to report a modest 8% year-on-year (YoY) increase in net profit for the third quarter of fiscal year 2024-25 (FY25), driven by slower loan growth and flat margins, according to analysts. Net interest income (NII) is projected to rise by 1.6% YoY in Q3FY25. The bank’s quarterly results will be announced on January 22, 2024.
A Moneycontrol poll of eight brokerages estimates HDFC Bank’s net profit at Rs 16,650 crore for Q3FY25, up from Rs 16,372 crore in the same quarter last year. NII is expected to reach Rs 30,690 crore, compared to Rs 28,471 crore in Q3FY24.
The analysts’ estimates are relatively consistent, meaning any significant positive or negative surprises could lead to sharp movements in the stock price. Among the brokerages, YES Securities has the most optimistic outlook, while Citi Research has forecast the slowest growth for the bank.
Key Drivers Behind HDFC Bank’s Earnings
- Weak Loan Growth: The bank is expected to report a 3% YoY increase in loans for Q3FY25, with a focus on improving its loan-to-deposit ratio (LDR). While deposits grew by 16% YoY to Rs 2.5 lakh crore, slower loan growth is likely to limit overall earnings expansion.
- Stable Margins: HDFC Bank’s net interest margin (NIM) is anticipated to remain unchanged at 3.6% YoY. Despite strong deposit inflows, the bank’s strategy to reduce its credit-to-deposit (CD) ratio post-merger with HDFC Ltd. has resulted in muted margin growth.
- Asset Quality Concerns: Deteriorating asset quality adds pressure. Citi Research predicts that the gross non-performing asset (GNPA) ratio will rise by 16 basis points (bps) YoY and 6 bps quarter-on-quarter (QoQ) to 1.4% in Q3FY25. Net NPA (NNPA) is expected to increase by 12 bps YoY and 2 bps QoQ to 0.4%, reflecting post-merger challenges in consolidating assets.
