HDFC Bank Q2 results preview: Net profit growth likely to remain flat; stock trades lower ahead of Q2 earnings

Market experts believe HDFC Bank’s net profit to grow 1-3% in Q2FY25 compared to the year-ago quarter. Sequentially, profit growth is almost flat at 1%.

In absolute terms, HDFC Bank’s Q2FY25 net profit number is expected to be anywhere between ₹15,900 to ₹16,450 crore during the September quarter.

Net interest income

HDFC Bank’s net interest income (NII), or the difference between interest earned and interest paid, is expected to grow by 9-13% YoY in the September quarter compared to a year ago. Sequentially, NII is seen posting flat to mildly positive growth, similar to the bank’s net profit.

Most experts are pegging the number to fall in the range of ₹29,810 crore to ₹31,111.2 crore during Q2FY25.

HDFC’s Q1FY25 performance

In the quarter ended June 2024 (Q1FY25), HDFC Bank’s NII stood at ₹29,837.1 crore, up 26.4% compared with the year-ago period. Sequentially, NII was up 2.6%. The increase in income was mainly aided by robust growth in advances during the quarter.

Net profit, meanwhile, had grown 35% year-on-year to ₹16,175 crore for Q1 FY25, aided by healthy NII and lower provisions. However, it was down 2% compared to the previous quarter.

Asset quality

Market observers expect HDFC Bank’s Q2FY25 asset quality to improve slightly, with gross non-performing assets (GNPAs) falling compared to the previous quarter.

Provisions, however, are expected to increase due to ageing and prudent accounting practices. To recall, the bank’s asset quality had deteriorated in the previous quarter, with the GNPA ratio rising 9 basis points (bps) sequentially to 1.33% in Q1FY25.

Margins likely to improve

Markets are also expecting the bank’s net interest margins (NIM) to remain stable in the September quarter at around 3.71% compared to the previous quarter. However, some positive commentary can be expected from the management in terms of margins in the medium term.

Loan/deposit growth outlook

Another key factor to watch is the loan/deposit growth outlook. Experts predict the bank’s loan book will grow at a muted 1.3% to ₹24.95 trillion in Q2FY25 compared to the previous quarter due to an added focus on the loan-deposit ratio (LDR). The LDR is also expected to improve to around 100% from 103% in Q1FY25.

The lender’s pre-quarter update on loans and deposits showed that sequential loan growth was around 1.3%, while deposit growth stood at 5.1%.

In the coming quarter, loan growth is expected to remain muted, and deposit growth is expected to outpace loan growth, which should further bring down the LDR levels.

HDFC Bank share price hints at cautious approach

HDFC Bank’s share price indicates that traders are taking a cautious approach towards the stock ahead of its Q2 results announcement. The stock fell more than 1% in trade on Friday to hit the day’s low of ₹1,654.1 on the National Stock Exchange of India (NSE), just a day before the earnings announcement.

The banking stock is down 0.5% in the past five sessions and 1.6% in the last one month. On a year-to-date basis, too, the stock is trading almost 2% lower.

As of 12:30 pm, shares of HDFC Bank were trading 0.15% lower at ₹1,670 apiece on the NSE.