HDFC Q1 results preview: Strong profit growth expected, aided by real estate financing

HDFC Q1 results preview: Strong profit growth expected, aided by real estate financing

Roger Pettingell Sarasota Real Estate

Housing Development Finance Corporation (HDFC), the biggest mortgage lender in the country, will announce its April-June quarter results tomorrow. Analysts on Dalal Street expect HDFC to post healthy growth in net profit and overall business led by improving traction in real estate sales. While eyes will be on any update from the management on the merger with HDFC Bank, analysts said they would also closely watch for outlook on margins, home loan demand and asset quality in the non-individual segment. HDFC share price is down 11% so far in 2022 to now trade at Rs 2,339 per share.

Asset under management to grow stronger

“Resilient momentum in Individual Loans to drive AUM growth; signs of recovery in construction finance portfolio likely,” said Yes Securities in their result preview for HDFC. Meanwhile, analysts at Motilal Oswal said that AUM growth is likely to be healthy at close to 18% on-year. “Expect disbursements in individual loans to be strong with momentum in the non-individual segment as well,” they added. According to HDFC’s January-March quarter results, the assets under management stood at Rs 6,53,902 crore. 

NIM to be flat

ICICI Direct projects Net Interest Margin to remain subdued sequentially at around 3.4%. Similarly, Yes Securities said that the limited increase in funding cost (majority funding from NCDs & Deposits) and lending rate increases would help in delivering a near-stable spread/NIM. Analysts at Nirmal Bang expect NIM to come in  at 3.3%. However, Motilal Oswal had a different view. “NIM to contract ~35bp QoQ due to delay in transmission of increase in borrowing costs,” analysts said. Both Yes Securities and ICICI Direct forecast that credit costs will be higher for HDFC in the April-June quarter. “Consistent collections and significant provisions on BS to drive benign credit cost,” said analysts at Yes Securities.

Net profit and Income expectations

Motilal Oswal: NII – Rs 4,778.9 crore (15.8% YoY)
Net profit – Rs 3,991 crore (33% YoY)
Provisions- Rs 441.1 crore (-35% YoY)

Nirmal Bang: NII – Rs 5,290.7 crore (19.9%)
Net profit – Rs 4,139.9 crore (38%)
Loan growth – 19.1% on-year

ICICI Direct: NII – Rs 4,350 crore 
Net profit – Rs 3,469 crore

Yes Securities: NII – Rs 4,662 crore
Net profit – Rs 4,105 crore

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