HDFC Bank Q4FY22 Earnings Preview: Private lender could see earnings growth of up to 38% year-over-year as asset quality expected to improve

India’s largest private lender, HDFC Bank, is expected to report strong fourth-quarter results for fiscal 2021-22 (Q4FY22) on Saturday. The bank’s earnings could increase by up to 38% year-on-year, while the quality of its assets should improve, several brokerages pointed out in its overview.

According to YES Securities, HDFC Bank’s profit could increase by 38% to Rs 1129.81 crore year on year, while net interest income (NII) could increase by nearly 15% year on year to Rs 1963 .68 crore.

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“Slippages are expected to decrease sequentially due to underlying factors. Net interest margin is expected to be slightly lower on a sequential basis as wholesale lending generally outpaces retail lending. Commission income would only be slightly higher due to low card fees. Treasury earnings would be subdued due to a rise in bond yields. Provisions would be lower sequentially,” YES Securities said in its report.

Similarly, Nirmal Bang, another brokerage, sees its profits rise by over 32% to Rs 1084.94 crore YoY, while NII expects it to rise by 15.6% to Rs 1978, 65 crore YoY in Q4FY22.

“We expect large-cap banks to continue to post higher growth (18.5% yoy) compared to their mid- and small-cap counterparts (10.1% yoy) and PSB (8.6% YoY) Preliminary figures show HDFC Bank outpacing its mid and small cap peers,” the brokerage said in its report.

Meanwhile, Kotak Institutional Equities also estimates HDFC Bank’s profit could rise by around 28% year-on-year to Rs 1,047.82 crore, and NII up by 16% to Rs 1,977.69 crore in Q4FY22.

The brokerage sees banks becoming more comfortable with underwriting, with frontline private banks outpacing others, and believes frontline banks will continue to deliver better credit growth given their customer base and their cost of funds advantage.

HDFC Bank recorded loan growth of 21% YoY (9% QoQ) and in retail segment grew by around 15% YoY (5% QoQ), commercial/rural by 31% yoy (10% QoQ), and wholesale by around 18% yoy (12% QoQ), Kotak Institutional said.

Expecting a strong performance from HDFC Bank in Q4FY22, Axis Securities said in a report: “NII will be supported by healthy loan growth; NIMs will remain QoQ stable; Commission income expected to improve, but lower cash income drives non-interest income, cost under control to support operating profit growth; slippages to moderate QoQ and asset quality to improve.

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