HDFC Q1 results preview: Double digit fall in profit likely; loan growth seen in 5-8% range

NEW DELHI: Mortgage lender HDFC is likely to report a double-digit fall in net profit for the June quarter, even as net interest income (NII) is seen rising 6-16 per cent during the same period. Loan growth is seen lower at 5-8 per cent while net interest margin (NIM) is seen falling sequentially.

In its update in mid-May, the housing finance company (HFC) said that 21 per cent of individual housing loans were under moratorium, which accounted for 26 per cent of the loan book. Analysts said the market is factoring in a low moratorium percentage in Round 2, but the slippages from the moratorium book will be key monitorable for the stock.

Nirmal Bang Institutional Equities, which believes that HDFC's NPA position is relatively much better than peers such as LIC Housing Finance and PNB Housing Finance, is expecting the HFC to report a 12.5 per cent year-on-year rise in net interest income (NII) at Rs 3,458 crore. It sees pre-provision profit rising 2.6 per cent to Rs 4999.70 crore, but net profit falling 11.3 per cent to Rs 2,843 crore.

"Strong other income led by HDFC Life stake sale and dividend would boost income. Led by Covid-19, loan growth may be slower at 8 per cent YoY to Rs 4,45,700 crore. NII is seen growing at 12.5 per cent YoY to Rs 3,150 crore factoring spreads contained around 2.4 per cent," said ICICI Securities. During the quarter, the company is believed to have booked Rs 1,240 crore in capital gains from selling of HDFC Life shares.

A lower growth in non-individual loans may result in a lower NIM of 2.25 per cent, the ICICI Securities said, while expecting standalone a profit for HDFC at Rs 2,949 crore. Asset quality is expected to slip further with gross NPA ratio rising to 2.17 per cent, up 18 basis points sequentially.

Emkay Global said HDFC’s loan growth might come in lower at 5 per cent, mainly due to continued disbursements for approved sanctions in the retail book. Trend in commercial real estate will be important to observe, it said, adding that the management commentary on NIMs, market share, retail and wholesale portfolio will be key to watch.

This brokerage is expecting a 25 per cent drop in profit at Rs 2,400 crore. The brokerage sees NIM at 3.10 per cent from 3.4 per cent in March quarter and 3.3 per cent in the year-ago quarter.

Expect a non retail lending-led AUM growth of 9 per cent AUM growth, said Motilal Oswal Securities, which sees incremental cost of funds for HDFC at 6 per cent from capital markets. This brokerage sees a 6.9 per cent rise in NII at Rs 3,156 crore but a 26 per cent slide in profit at Rs 2,366 crore.