Country’s second-largest private sector lender HDFC Bank is expected to report more than 20 percent growth in profit in Q4FY20 and there could be some impact of likely contingent provisions on profitability.
The stock closed at Rs 910.40, up 3.33 percent, ahead of quarterly earnings scheduled to be announced on April 18. It lost more than 32 percent during the quarter ended March 2020 largely due to lockdown-led disruption in the economy after COVID-19 spread.
Brokerages largely expect net interest income during the quarter to be in the range of 12-17 percent due slow loan growth which could be around 20 percent compared to year-ago period.
“We expect loan growth to slow to around 20 percent YoY, resulting in lower NII growth at around 15 percent YoY. Retail loan growth slowdown is on account of weak volume growth in auto though the share of unsecured portfolio would continue to remain high (lockdown impact negligible),” said Kotak Institutional Equities which sees 21 percent growth YoY in profit and 17 percent in pre-provision operating profit.
Sharekhan also expects loan growth to be around 20 percent YoY, but feels a cautious outlook on growth may continue.
“Fee income growth from mutual funds will be slower y-o-y due to changes in regulations while asset and payment fees will grow at a slower rate,” said the brokerage which sees profit rising 22 percent, NII 17 percent and pre-provision operating profit 19 percent YoY.
According to brokerages, there could be marginal increase in gross non-performing assets during the quarter QoQ and also bank may make some contingent provisions which could impact earnings.
“Led by slippages in auto and unsecured retail loans, GNPA ratio is seen inching up around 6-8 bps QoQ and credit cost (including contingent provision) at around 30 bps of advances,” said ICICI Direct.
Sharekhan expects a marginally increase in GNPA, overall credit costs are well within range. “The bank may choose to build a contingent provisions buffer for FY21.”
Dolat Capital feels HDFC bank will likely be amongst the key beneficiaries (including other large banks) on the CASA/liability front from the Yes Bank episode, aiding its CoF. “The bank could use the opportunity of contained slippages in Q4FY20 to arrest the recent decline in PCR (at 67 percent in Q3FY20).