HDFC Bank Q2 Results On October 16: Net Profit To Jump, Margins Likely To Take A Hit

India’s largest private lender HDFC Bank, which is scheduled to release its financial results on Monday, October 16, is expected to post a robust growth in its net profit, according to analysts. The bank, however, is likely to see a hit on its margins due to excess liquidity.

Update: HDFC Bank’s Q2 Net Profit Jumps 50% To Rs 15,976 Crore

According to a Moneycontrol report citing the average of five brokers’ estimates, HDFC Bank is expected to register a 39.4 per cent year-on-year (YoY) jump in its net profit to Rs 14,780 crore. The bank’s net interest income (NII) may rise 33.6 per cent to touch Rs 28,089.9 crore.

Brokerage firm Jefferies in its report said the RBI’s recent rate hikes will likely hurt the bank’s cost structure, as HDFC’s non-retail liability book will carry a higher cost.

“Risk is from a spike in rates as HDFC Bank now has a higher share of non-retail funds and its cost of funding will be more linked to market rates, than in the past… Also, a slower than expected ramp-up of priority sector loans through the commercial and rural banking division would drag margins and ROA, as it would lead to higher cost of compliance towards priority sector loans,” Jefferies said.

Domestic brokerage house Axis Securities in its report highlighted a contraction in margin due to excess liquidity and a rise in gross non-performing loans on account of stress in the non-individual book of HDFC. It said provisions are likely to rise 9.8 per cent quarter-on-quarter to Rs 3,139 crore in the second quarter.

Last month, another brokerage house Nomura had cut its net interest margin (NIM) forecast for HDFC Bank while downgrading the stock. NIM could see pressure over the next two to three quarters as HDFC’s second quarter opening book NIMs were at 2 per cent versus 2.7 per cent in Q1.

This was mainly on account of excess liquidity being carried post-merger, Nomura said.

In the previous quarter ended June 2023, HDFC Bank reported a 29.13 per cent jump in consolidated net profit to Rs 12,370.38 crore. The bank, which recently merged mortgage financier parent HDFC into itself, had reported a net profit of Rs 9,579.11 crore in the year-ago period and Rs 12,594.47 crore in the preceding March quarter.