HDFC Bank Q2 Results: Focus Returns To Growth
HDFC Bank reported improved loan growth. Asset quality improved but restructuring was higher than expected.
The country's largest private lender HDFC Bank reported a 17.6% rise in second quarter net profit, as loan growth picked up and asset quality remained stable.
The lender reported a net profit of Rs 8,834 crore for the quarter, backed by a 12% rise in net interest income and a 21.5% increase in other income. Gross non performing assets were marginally lower at 1.35% at the end of September compared to 1.47% at the end of June.
Here's what brokerages said about the earnings:
Emkay
HDFC Bank reported slightly lower than expected profit due to lower net interest margin of 4.1%, higher staff expenses and accelerated contingent provisions.
The headline NPA ratio improved by 12 basis points quarter-on-quarter to 1.4% due to lower slippages and better recoveries, but higher restructuring at 1.7% of loans was slightly disappointing.
Credit growth improved to 15.5% year-on-year and 4.5% quarter-on-quarter due to better traction in retail loans (up 13% year-on-year) and commercial loans (up 28% year-on-year). Wholesale loan growth moderated to 6%, but the bank sees improving growth opportunities in the corporate segment.
We believe growth acceleration and the lifting of an embargo on the credit card business are positive factors, while further relief on digital 2.0 initiatives is awaited.
Retain 'Buy' with a target price of Rs 2,050.
Bernstein
While the second quarter earnings reflected the wider post-Covid recovery, the focus will be on the growth pitch from the bank.
It reported strong momentum in retail, SME, and rural loans – with plans to continue growing them.
Asset quality was steady with the restructured book being the key monitorable. The bank guided towards adequacy of its buffer provisions to cover any stress from the restructured pool.
Motilal Oswal
Earnings were in line, despite making additional contingent provisions to strengthen its balance sheet.
HDFC Bank continues to deliver strong business growth versus peers, resulting in market share gains. This was led by a healthy pickup in the retail segment, while commercial and rural banking continues to remain robust.
Asset quality ratios have improved, while the restructured book increased to 1.5% of loans (vs 0.8% in Q1 FY22). However, high provision coverage and contingent provision buffer provide comfort on asset quality.
Pick up in loan growth, particularly retail, would aid net interest margin and margins which would drive profitability.
We maintain 'Buy' with a target price of Rs 2,000.
Jefferies
We are encouraged to see 5-7% quarter-on-quarter growth in retail/ commercial loans and management sounded buoyant.
Our recent channel checks at consumer durable stores and e-commerce platforms show that HDFC Bank has been quite active in financing new demand.
Slippages were manageable and restructured loans rose from 0.8% of loans to 1.5%. 80% of fresh restructuring were of personal loans. We note that 23% of personal loans restructured in first-package slipped into non performing loans and the bank has already written off 63% of these.
Subsidiary performance rebounded led by HDB Financial Services.
Rebound in growth could aid rerating given recent underperformance. We marginally raise estimate and target price to Rs2,070.
→ More Research Reports On HDFC Bank Q2 Earnings
Stable Margins, Lower Credit Costs Aid Profitability: Systematix
Strong Growth Outlook; Asset Quality Tailwinds Remain: Dolat Capital