India Inc’s earnings season has started positively with two major IT companies, TCS and Infosys, reporting strong quarterly results for March 2022 this week. Now, the banking sector will also begin reporting its financial results, with the largest private sector lender, HDFC Bank, reporting its fourth quarter results on April 16. Here’s what analysts expect from this lender and the industry as a whole:
“(India Inc’s) adjusted PAT (profit after tax) is likely to grow 32 percent yoy, driven largely by strong banking performance,” YES Securities said in a report, adding that the banking sector is expected to see revenue growth from 19.2 percent year-on-year in the fourth quarter ended March 2022.
War between Russia and Ukraine: will it have any impact?
In terms of asset quality, the new bank slippages in the March 2022 quarter will generally be stable to decline on a sequential basis and there may have been some incipient underlying stress due to the third wave of Covid-19 and due to the disruption caused by the Russian-Ukraine war, the report said. “The impact of the war between Russia and Ukraine should not be widespread and serious.”
Of the major banks, the report said, analysts see a rise in provisioning consecutively for Axis Bank and Kotak Mahindra Bank, and a slight increase for SBI. “On the other hand, we see a decline in provisions for ICICI, BOB and HDFC Bank.”
In terms of net interest margin, the report said that, unlike recent quarters, interest reversal considerations would be a minor factor affecting NIM’s sequential evolution as the sequential delta in slippage would be lower in 4QFY22 in compared to recent quarters. “Having said that, we see the slippage decrease significantly for IndusInd Bank and Federal Bank. The other aspect to keep in mind is loan diversification.”
It also said sequential credit growth is expected to be fairly healthy in 4QFY22, as retail payouts will have surged following a relatively low-impact third wave of COVID-19. Wholesale loan growth would also be strong given an improved corporate lending environment. “For IndusInd Bank, there would be a significant acceleration in corporate lending.”
HDFC Bank Q4 Results on April 16: What to Expect?
Speaking about HDFC Bank’s earnings forecast, it said the slippages should sequentially ease due to underlying factors. The net interest margin should be slightly lower on a sequential basis because wholesale lending generally outperforms retail lending. “Fee revenue would be only slightly higher due to the slow card costs. Government bond gains are said to be moderate due to a rise in bond yields. The provisions would successively be lower.”
The bank is expected to post an after-tax profit of Rs 11,298 crore in the March 2022 quarter, a 38 percent jump from the previous fiscal year. According to the YES Securities report, net interest income could increase by 14.7 percent to Rs 19,636 crore during the quarter.
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