Results preview: HDFC Bank’s Q4 seen healthy on merger impact, treasury gains, Credila stake sale

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HDFC Bank is seen posting steady earnings for Q4 FY24 on the back of pick-up in deposit growth, treasury gains and one-time gains from the sale of stake in HDFC Credila.

The private sector lender’s net profit is seen rising 30-50 per cent, largely due to the merger of erstwhile HDFC with the bank effective July 2023. Treasury gains for the quarter are estimated to be around ₹1,000 crore.

“Balance sheet management is improving as provisional numbers for Q4 FY24 suggested that deposit accretion was strong at 7.5 per cent q-o-q, while LDR fell by 610 bps to 104 per cent due to lower loan growth at 1.6 per cent q-o-q. While core earnings growth would be muted for FY24E (4.5 per cent y-o-y), as NIM improves in FY26 core PAT may enhance by 19 per cent,” Prabhudas Lilladher said in a pre-earnings note.

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HDFC Bank saw one of the highest loan growth of 55.4 per cent on year owing to the merger. Sequentially, credit growth was 1.6 per cent higher. The bank’s deposits rose 26.4 per cent on year and 7.5 per cent on quarter.

Brokers’ call

“Of the ₹1.7-lakh crore deposits mobilised, 77 per cent were retail deposits. This in our view is an excellent outcome given the current liquidity environment. CASA growth at 8.8 per cent q-o-q is also an exceptionally strong outcome,” Macquarie Research said in a note, adding that the bank is expected to have 15 per cent incremental deposit market share in FY24.

Advances growth slowed down as focus shifts towards deposit mobilisation, Axis Securities said adding that deposit growth improved on quarter owing to which margins are likely to remain stable sequentially.

Phillip Capital said that while the share of CASA declined due to rising interest in term deposits, net interest margin (NIM) for the bank is seen stable at 3.42 per cent.

Further, stable opex ratios and stake sale in HDFC Credila are expected to support the non-interest income and keep growth in pre-provisioning operating profit (PPOP) healthy, analysts said.

Also read: Banks’ margins to shrink but loan growth, lower credit cost to aid PAT

HDFC Bank’s loan growth in Q4 appears to be concentrated in commercial-rural and urban retail, BNP Paribas said, adding however that the private sector lender remains a top pick based on estimates of key fundamentals. This is inspite of accounting for the timeline for PSL asset build-up, muted CASA momentum and no expected savings in operating cost from merger synergies.

“Despite these conservative assumptions, we see RoA touching 1.9 per cent by end-FY25 and RoE nearing the pre-merger steady state of 17 per cent by H2 FY26,” it said.

Credit cost is seen slightly lower for Q4 on the back of stable asset quality. Guidance on business growth including LDR ratios, margin improvement and earnings trajectory will be the key monitorables, analysts said.