HDFC Bank may post muted PAT growth in Q2

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Country’s largest private sector lender HDFC Bank will likely post a muted, up to 3 per cent year-on-year (YoY) growth, in its Q2FY25 net profit, analysts say. The biggest focus would be on the bank management’s commentary on enhancing net interest margin (NIM) and deposit mobilisation efforts.

“Slower credit growth and elevated operating expenditure (as the bank continues to build franchisee) could keep earnings in check. Deposit growth quarter-on-quarter and margin sustenance shall remain key monitorable,” said Emkay Global Financial Services. The lender’s NIM stood at 3.5 per cent in Q1FY25, lower than 4.1 per cent a year ago.

According to Motilal Oswal, the bank is targeting sustainable growth, focusing on expanding its physical and digital infrastructure. Despite short-term softness due to constraints on the credit-deposit (CD) ratio, the bank expects improved asset mix and gradual replacement of high-cost borrowings from erstwhile HDFC borrowings to aid margin recovery.

“The Retail, and CRB (commercial and rural banking) portfolios have shown robust traction, with these segments now contributing 81 per cent of the total mix. The bank’s CRB segment alone saw 28 per cent YoY growth in FY24. HDFCB expects to maintain this growth momentum, achieving a loan CAGR of 10 per cent and deposit CAGR of 15 per cent over FY24-27.”

The brokerage expects HDFC Bank’s NIM to stabilise at 3.5 per cent- 3.6 per cent by FY26, as the mix of high-yielding retail assets grows and high-cost borrowings are replaced.

NII may grow

Per Axis Securities, HDFC Bank’s net interest income (NII) will likely grow 10 per cent YoY to ₹30,210 crore in Q2. The brokerage expects the bank’s credit cost to be contained at 50 basis points (bps).

According to HDFC Bank’s Q2 provisional business updates, the lender’s deposits grew at more than twice the pace of credit growth. Its gross advances were up 7 per cent YoY and 1 per cent QoQ at ₹25.19 lakh crore as of September 30,whereas deposits surged by 15 per cent YoY and 5 per cent QoQ to ₹25 lakh crore during the same period. In a bid to lower its CD ratio, the bank also securitised ₹192 crore of loans in Q2FY25, and in the year-to-date period, the lender has securitised loans amounting to ₹24,600 crore.