Q2 Results 2023: Net profit may rise, margins likely to contract

HDFC Bank, the largest private sector lender in India, is slated to unveil its second-quarter FY24 earnings on October 16, 2023. This report marks the initial quarterly financial disclosure following the merger with Housing Development Finance Corporation (HDFC), effective from July 1. While an uptick in net profit for Q2FY24 is expected, the generation of excess liquidity might impact the net interest margin. According to a report from Motilal Oswal Financial Services, the Indian banking sector is anticipated to exhibit reasonable year-on-year (YoY) growth in the July-September quarter, with private and PSU banks likely to register earnings growth of approximately 25% and 20% YoY, respectively. However, there could be some compression in the net interest margin (NIM).

Q2 results

In addition to the financial metrics, analysts will closely scrutinize management commentaries on unsecured loan growth and margins, traction in deposits, operating expense trends, as well as the outlook for fee income and treasury. As of September 30, 2023, HDFC Bank’s deposits stood at approximately ₹21.73 lakh crore, reflecting a growth of about 29.9% over ₹16.73 lakh crore as of September 30, 2022. For Q2FY24, the bank’s current account and savings account (CASA) deposits increased by 7.6% to around ₹8.17 lakh crore from ₹7.59 lakh crore the previous year. The CASA ratio stood at around 37.6%, compared to 45.4% in the same period last year.

HDFC Bank has reported robust growth in gross advances, registering a substantial 57.7% increase to ₹23.54 lakh crore as of September 30, 2023, compared to ₹14.93 lakh crore in the previous year. The bank highlighted significant year-on-year (YoY) growth in domestic retail loans at approximately 111.5%, while commercial and rural banking loans increased by around 29.5% YoY, and corporate and other wholesale loans grew by 8% YoY, as per a regulatory filing on October 4.

In the aftermath of the merger with parent company HDFC Ltd, the bank revealed its highest-ever home loan disbursals, amounting to around ₹48,000 crore. This signifies a growth of 14.0% over the quarter ending June 30, 2023, and a 10.5% increase over the quarter ending September 30, 2022. Furthermore, non-individual loans of the erstwhile HDFC Limited (eHDFCL) stood at approximately ₹1.02 lakh crore as of September 30. Despite these positive developments, HDFC Bank shares have exhibited a downward trend, ranking among the worst-performing banking stocks this year. The share price has declined by 8% in the last month, 7% in the last three months, and has witnessed a drop of over 6% year-to-date (YTD). Over the past year, HDFC Bank shares have shown a modest gain of 6.3%, with a notable rise of over 27% in the last three years.