India Inc’s earnings season has seen a positive start with two major IT companies, TCS and Infosys, declaring good March 2022 quarter results this week. Now, the banking sector will also start declaring its financial results, with the country’s largest private sector lender HDFC Bank announcing its Q4 results on April 16. Here’s what analysts expect about this lender and the sector as whole:
“(India Inc’s) adjusted PAT (profit after tax) is likely to grow by 32 per cent y-o-y, largely driven by a strong performance from banks,” YES Securities said in a report adding that the banking sector is expected to post a revenue growth of 19.2 per cent year-on-year in the fourth quarter ended March 2022.
Russia-Ukraine War: Will it have any Impact?
On the asset quality, banks’ fresh slippages in the March 2022 quarter will generally be stable to lower on a sequential basis and some incipient underlying stress may have formed due to the third wave of Covid-19 and due to the disruption caused by the Russia-Ukraine war, the report said. “The impact from the Russia-Ukraine war should not be widespread and severe.”
Among the major banks, the report said the analysts see a rise in provisions sequentially for Axis Bank and Kotak Mahindra Bank, and a slight rise for SBI. “On the other hand, we see a decline in provisions for ICICI, BOB, and HDFC Bank.”
On the net interest margin, the report said that unlike the recent quarters, considerations surrounding interest reversals would be a less important factor impacting the sequential evolution of NIM as the sequential delta in slippages would be lower in 4QFY22 compared with recent quarters. “That being said, we see slippages declining materially for IndusInd Bank and Federal Bank. The other aspect to keep in mind is loan spread.”
It also said sequential loan growth is expected to be reasonably healthy in 4QFY22 as retail disbursement will have picked up following a relatively unimpactful third wave of COVID-19. Wholesale loan growth would also be strong given an improved environment for corporate lending. “For IndusInd Bank, there would be a significant acceleration in corporate lending.”
HDFC Bank Q4 Results on April 16: What to Expect
On the HDFC Bank’s result expectation, it said slippages should decline sequentially due to underlying factors. Net interest margin should be slightly lower on a sequential basis due to wholesale lending generally outpacing retail lending. “Fee income would only be slightly higher due to sluggish card fees. Treasury profit would be subdued due to a rise in bond yields. Provisions would be lower sequentially.”
The bank is expected to post a profit after tax of Rs 11,298 crore in the March 2022 quarter, a jump of 38 per cent as compared with the previous financial year. Its net interest income may rise 14.7 per cent to Rs 19,636 crore during the quarter, according to the YES Securities report.
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