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Q2 Results: HDFC Bank Meets Higher Profit Estimation on Stable Loan Growth

CIOInsider Team

Bengaluru, India- November 19, 2019: Change in delayed tax assets (DTA) aggregate due to the government’s choice to justify corporation tax rate may hamper HDFC Bank’s September quarter (july-sept) numbers for the financial year 2019-20 (Q2fy20). The analysts of the bank may post a 22 per cent year-on-year increase in net profit at around Rs 6,164 core, when the earnings are reported.

Mutual funds have improved their weight on private banks to new high of 20.8 per cent in September.Private Banks are the bottomsegment holding for MFs, followed by non-banking financial companies (8.9 per cent), technology (8.7 per cent), consumer (8.4 per cent), and capital goods (7.8 per cent), showed a report by Motilal Oswal Financial Services.

Analysts at Emkay Global Financial Services ponder that though the bank is enjoying the overall benefit of the tax rate cut; its DTA could be hit by Rs 1,200 crore in this quarter. They say that the “benefits of the lower tax rate could get off-set by the mark-down on one-time DTA, leading to a net higher tax outflow”. Sequentially, the PAT is likely to rise nearly 10 per cent from Rs 5,568.2 crore (Q1FY20).“Revised lower tax rate, post-DTA impact will likely be used for higher contingency provisions given the stress emerging in the sector,” analysts at Prabhudas Lilladher noted in an earnings preview report.

All together HDFC Bank is India’s largest lender by market value. The news reflects to be bad and worse in reality: Economic growth is reducing, loan losses are increasing and shadow banks are delayed in crisis. The investors keep piling into HDFC Bank’s stock are convinced that it will emerge a winner from India’s financial woes. The company’s market value has rushed by $21 billion over the past years, in the world more than any other bank. Among the 25 greatest lenders over the world, no other stock instructs a higher price relative to earnings or net assets.

For the period of quarter under review, the stock of India’s largest bank by market value has outperformed the benchmark guides. Between July and September, HDFC Bank immersed 1.2 per cent, as against a 2.6 per cent decline in the S&P BSE Sensex. The S&P BSE Bankex, too, tumbled 12.1 per cent during the period.“Slippages should moderate as agricultural-slippages should be much lower QoQ… However, we will watch loan growth, current account-savings account growth and NPLs from retail book,” said Prabhudas Lilladher.

During the past year, the company’s market value has rushed by $21 billion, than any other bank throughout the world, a Bloomberg report said. HDFC Bank would seize market share from the preparation of war against the enemy force, shadow lenders and benefit from a flight to quality by investors who have grown wary of fewer competitors.

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