HDFC Bank likely to report 28% rise in PAT; stock slips ahead of Q2 results

NEW DELHI: HDFC Bank Ltd slipped as much as 2.4 per cent in mid-morning trade on Tuesday ahead of its results for the quarter ended September 30 which will be out later today.

The private sector bank is likely to report a net profit of Rs 1,990 crore for the quarter ended September 30, up 27.6 per cent, as compared to Rs 1,560 crore in the corresponding quarter last fiscal, according to an ET Now Poll.

At 10:50 a.m.; HDFC Bank recouped some of the morning losses and was trading 1.5 per cent lower at Rs 657. It has hit a low of Rs 652.65 and a high of Rs 673 in trade today.

Net interest income is expected to be at Rs 4,515 crore, up 21 per cent, as compared to Rs 3,731.7 crore in year-ago period. Pre provision profit (PPP) or profits before deducting any provisions is likely to rise by 27.2 per cent to Rs 3,270 crore from Rs 2,571.3 crore, Year-on-Year (YoY).

According to analysts, the PAT growth of 30 per cent is likely to be a challenge for the bank unless there are lesser provisions. They are expecting lower floating provisions.

NIMs are likely to dip slightly, quarter-on-quarter (Q-o-Q). Fee income growth is likely to be healthy at about 15-17 per cent, Y-o-Y.

While asset quality is likely to be largely controlled, gross NPA may rise slightly, Q-o-Q. Loan growth is expected to be at 17-18 per cent, Y-o-Y.

"HDFC Bank may report marginally lower NIMs and loan growth slightly ahead of sector growth although fee income driven by off-balance sheet activity could surprise on the upside," said Jefferies report.

"The worry line for the bank will be managing core earnings given slowing activity levels. While the bank has steadfastly denied guiding a 30 per cent profit growth number, we believe it would strive to achieve the same at the cost of not provide floating provisions where it has been a trend-setter," the report added.

The brokerage has a 'Buy' rating on the stock with a target price of Rs 770 per share.

Important factors to watch:

Trend in NIM, CASA and outlook

Asset quality trends especially in retail segment

Growth outlook, branch expansion plans