“Profit seems likely to be weak mainly on account of a higher tax rate and lower treasury profits,” said Suresh Ganapathy, Head of financial services research at Macquarie Capital.
This will be the first quarter post the merger with erstwhile HDFC Corporation where on year numbers will be comparable.
According to Macquarie, for the September quarter HDFC Bank could see Rs 80,000 crore addition in deposits over the June quarter. It also expects the loan-to-deposit ratio to come down marginally. The lender has also been under pressure to reduce its loan to deposit ratio (LDR) and focus on margins. HDFC Bank’s LDR from a peak of 110% has already declined to 103.5% and is expected to come down further.
The analysts expect loan growth to remain weak at 8% on year due to sell-downs and base effect. According to Macquarie the fall in loan growth is largely due to the lender’s plans to sell about Rs 70,000 crore of its loans and a base effect playing due to the merger with erstwhile HDFC Corporation.
Macquarie also expects pre-provision operating profit (PPOP) growth to be 10% on year due to lower other income driven by lower treasury gains. Net interest income (NII) growth is expected to be around 14% on year. It also expects net interest margins to expand 5 basis points sequentially to 3.52%Cost-income ratio is expected to remain flat around 41% and credit costs to see marginal change sequentially around 40 basis points.”We expect HDFC Bank to report a nearly 16% EPS CAGR over the next three years driven by improving margins,” Ganapathy said. “Borrowings as a percentage of overall liabilities now stand at 20% versus 10% pre-merger, and HDFC Bank should benefit from falling rates.
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