“We built in calculated NIMs of 3.5% for HDFC Bank (lower than its 1Q proforma NIMs of 3.7-3.8%), mainly led by the drag from higher liquidity. We will watch out for trends in its post-merger RoA profile, as well as how much of the impact on its NIMs are structural vs transient,” said Param Subramanian of Nomura.
It is being expected that margins may bounce back in the second half of the fiscal year as credit growth picks up and liquidity is utilized.
As Q2 would be the first quarter post the reverse merger with HDFC, analysts see a likelihood of a fair degree of volatility in estimates.
While Kotak Institutional Equities expects HDFC Bank’s Q2 PAT to rise 44.5% to Rs 15,327 crore, Motilal sees a growth of 39.4%. “We expect gross NPL ratio to be marginally higher as reported in the merged balance sheet. The near-term focus would be the progress of NIM and the impact of PSL (FY2025),” Kotak Equities said.
In its business update for the quarter, the lender said advances for the merged entity came in at Rs 23.5 trillion, growing 13% YoY and 5% QoQ. Total deposit growth was reported at 5.3% QoQ. CASA growth at 7.6% YoY was below expectations given the stellar market share in preceding quarters.
“This is true even when seen in light of the June 2023 industry CASA growth at 2% YoY and the high base of FY23 incremental market share of 43%. However, we note that this was indeed a transition quarter and branch bandwidth may have been consumed by systems integration, among other factors,” said Santanu Chakrabarti of BNP Paribas.Domestic brokerage firm Prabhudas Lilladher expects loan growth to be robust, up 4.9% QoQ led by other retail and CRB portfolios.
“GNPAs could see an improvement of 6bps QoQ to 1.34% while we expect provisions to remain flat,” it said.
Ahead of the earnings, sizeable block deals worth nearly Rs 3,000 crore were seen in HDFC Bank shares during the week. The stock ended 0.85% lower at Rs 1,536.75 on BSE.
“The support is at Rs 1480, and a close below this could trigger more selling pressure. On the upside, the immediate hurdle at Rs 1554, if breached, might lead to fresh short-covering,” Kunal Shah of LKP Securities.
Global brokerage firm Jefferies has a buy rating on the stock with a target price of Rs 2,030, Prabhudas Lilladher Rs 2,025, Nomura Rs 1,800, Nuvama Rs 1,960, JM Financial Rs 1,850 and BNP Paribas Rs 1,524.85.
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