India's top private sector lenders, HDFC Bank and ICICI Bank, are gearing up to announce their December quarter results this Saturday. Analysts predict a steady performance from both banking giants. This optimism stems from robust loan growth, recovering margins, and well-managed operating costs. However, a seasonal uptick in agriculture-related stress could lead to a moderate rise in loan slippages.
Brokerages Forecast Consistent Growth
Five major brokerages have shared their insights ahead of the earnings release. They highlight that firm loan expansion and improving net interest margins will support the banks' bottom lines. Alongside HDFC and ICICI, several other banks including RBL Bank, Yes Bank, IDBI Bank, UCO Bank, and Punjab and Sind Bank will also report their Q3 figures on the same day.
HDFC Bank's Projected Performance
HDFC Bank is anticipated to post a net profit of approximately ₹18,366 crore for the quarter. This represents a 10% increase compared to the same period last year, according to a Bloomberg poll of 20 analysts. The bank's loan growth shows strong momentum, with gross advances rising nearly 12% year-on-year and 3% quarter-on-quarter based on provisional data.
Motilal Oswal Financial Services notes that HDFC Bank is positioned for steady loan growth, driven by broad-based expansion and healthy disbursement activity. The brokerage expects a 3% sequential rise in both advances and deposits. Elara Capital India emphasizes that deposit traction and the retail loan mix will be critical factors to monitor this earnings season.
Asset quality is expected to remain stable overall, but seasonal pressures in the agriculture sector and Kisan Credit Cards may cause a moderate increase in slippages. Provisions are likely to decrease sequentially after higher one-off provisions in the previous quarter.
Net interest income is projected to reach ₹32,856 crore, marking over 7% annual growth and 4% quarterly growth. Consequently, net interest margins are seen improving to 3.38% from 3.27% in the prior quarter. Systematix Institutional Equities points out that falling deposit costs will offset declines in advance yields, leading to marginally higher NIMs. Motilal Oswal believes the worst of margin compression is behind HDFC Bank, with further improvements expected in the coming quarters.
Fee income is broadly stable, but other income may dip due to higher recoveries in Q2FY25. Operational expenses are expected to remain under control.
ICICI Bank's Steady Quarter Ahead
ICICI Bank is also poised for another steady quarter, characterized by healthy growth, stable margins, and robust asset quality. However, seasonal agriculture stress might push slippages up slightly. A Bloomberg poll of 13 analysts forecasts a net profit of ₹12,493 crore, up 6% year-on-year and 1% quarter-on-quarter.
Motilal Oswal expects nearly 4% sequential growth in both loans and deposits. In the September quarter, domestic loans grew about 11% annually, while deposits increased over 9%. Slippages are likely to rise due to seasonal agricultural issues, leading to a slight increase in provisions. Operating expenses should remain broadly stable, and fee income is set to grow with business expansion, though treasury income may be impacted by rising bond yields.
Net interest income is estimated at ₹22,212 crore, reflecting 9% annual and 3% quarterly growth. Analysts have mixed views on margins. Elara Capital and Motilal Oswal anticipate benefits from the cash reserve ratio cut, with Motilal expecting a 3 basis point improvement. YES Securities predicts lower margins, while Systematix and Bloomberg estimates suggest stability. ICICI Bank's NIM stood at 4.30% in the September quarter.
Key Factors to Watch
Investors will closely watch for any updates on the extension of ICICI Bank's chief, Sandeep Bakshi. Management commentary from both banks regarding loan and deposit growth, credit-deposit ratios, margin trajectories, and asset quality will be under intense scrutiny. These insights will provide crucial guidance on the banks' future performance and strategic direction.
