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Q2FY23 Preview: HDFC Bank: NII seen at Rs201.0 billion, PAT at Rs104.5 billion

14 Oct 2022 , 06:41 AM

Result date: 15^th October, 2022
Recommendation: Buy
Target price: Rs1,950

HDFC Bank posted healthy loan growth during the quarter ended September 30, 2022. This was led by strength in CRB and wholesale loans. The Bank’s loan book grew 23.5% over the year-ago quarter. Deposit growth sustained at 19% over the year-ago quarter, but CASA ratio decreased ~40 basis points sequentially to 45.4%.

HDFC Bank’s Net Interest Income (NII) could grow 14% over the year-ago quarter and 3% sequentially. Growth in non-interest income could lag that in NII, leading to a 10% year-on-year growth in total income (7% growth sequentially).

Net Interest Margin should improve sequentially, however higher wholesale growth and lower CASA could limit the improvement. Asset quality is expected to remain benign (Gross NPA ratio is estimated at 1.3% versus 1.4% in the year-ago quarter).

Provisions are likely to decline both over the year-ago quarter and sequentially. Consequently, the Bank’s Profit After Tax or PAT could grow at a higher pace as compared to the topline.

Important management insights to watch out for:

Credit demand across key segments
Asset quality trends
Updates on the merger with HDFC

Rs. Billion	September 2022 estimates	QoQ change	YoY change
Net Interest Income	201.0	3%	14%
Total Income	277.1	7%	10%
Pre-Provisioning Operating Profit	166.5	8%	5%
Provisions	28.0	(12)%	(29)%
Profit After Tax	104.5	14%	18%
Loans	14,800	6%	23%
Deposits	16,735	4%	19%