HDFC Q3 Preview: Profit seen rising 15% YoY on strong loan growth, stable margin

Strong growth in loan book and stable margins are likely to help Housing Development Finance Corporation (HDFC) report a double-digit growth in net profit for the quarter ended December.

The home loan company will release its third quarter earnings on Thursday.

The index major is seen reporting a 15% year-on-year (YoY) rise in net profit for the quarter to Rs 3,752 crore, according to the average of six estimates.

Net interest income is expected to grow by 14% on year to Rs 4,877 crore, according to the estimates.

Besides numbers, the Street will look for further updates on the merger of the company with HDFC Bank.


Following are the summary of analysts’ expectations:

ICICI Securities
The brokerage expects AUM growth of 16.4% (from 14.7% in FY22) to Rs 7.2 lakh crore. With more than 4.5% QoQ growth in individual AUM, it expects HDFC to register >20% YoY growth while non-individual loans will also see positive low-single digit growth YoY.

With repricing benefit more than offsetting the cost pressures, NII growth is likely to normalise to 17% YoY (vs 13% in Q2FY23 and 8% in Q1FY23).

In Q2FY23, HDFC carried provisioning of 0.67% on individual loans and 7.77% on non-individual loans.

With coverage of 55% on stage-3 assets, 23% on stage-2 assets and 25 bps on stage-1 assets, HDFC cumulatively carries provisions at 2.21% on overall stress pool.

With this buffer, incremental provisioning requirements are likely to be capped at <30 bps for Q3FY23.

Non-interest expense ratios are likely to be higher than historical average largely due to increased upfront expenses on staffing, loan processing, branch expansion and information technology to meet the increased demand for home loans.

With all these, the brokerage expects operating profit growth to be upwards of mid-teens in Q3FY23 and earnings are also likely to increase in the similar trajectory of 18%.


Prabhudas Lilladher
HDFC is expected to see a stable quarter on earnings. Asset quality metrics would remain steady. The brokerage expects a 15.4% YoY growth in net interest income to Rs 4,945 crore. It expects provisions to rise 7% YoY to Rs 420 crore. Credit cost is likely to dip to 0.27% from 0.29% a year ago, and 0.32% a quarter ago. Net interest margin will see an 8 bps improvement YoY to 3.43%. GNPA is seen improving to 1.48% from 2.32% a year ago and 1.59% a quarter ago.


Kotak Institutional Equities
It expects HDFC to deliver 4.3% QoQ loan growth in the individual segment in 3QFY23. This will translate to 19% YoY growth in individual loans. Overall loan growth is lower at 16% due to slower growth in the non-individual segment. NIMs will expand marginally to 2.6% despite rise in interest rates due to lower liquidity on the balance sheet.


Motilal Oswal Securities
AUM growth is likely to be healthy (~15% YoY). It expects disbursements in individual loans to be stable QoQ. Margins to largely remain stable sequentially, while PPOP to grow 12% YoY. It estimates credit cost at 28 bps.

The brokerage will watch out for outlook on margins, home loan demand, and asset quality in the non-individual segment.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)