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HDFC Bank Q3 Results Review - Stable Quarter; Slight Surprise On Net Interest Income: Dolat Capital

While reported core net interest margin were stable QoQ, calculated NIM expanded by 12-14 bps QoQ, excluding one-time benefits.

<div class="paragraphs"><p>A HDFC Bank branch exterior. (Source: BQ Prime)</p></div>
A HDFC Bank branch exterior. (Source: BQ Prime)

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Dolat Capital Report

HDFC Bank Ltd. posted a good quarter with strong net interest income growth of 24% YoY/9% QoQ). Even after excluding one-time benefit 6 basis points from int on IT refund, calculated net interest margin were up 12-14 bps QoQ, slightly higher than expected.

Higher opex (up 11% QoQ) was offset by lower credit costs, with profit after tax growth of 19% YoY and return on asset of 2.2% in Q3 FY23.

Asset quality metrics were stable QoQ, with moderation in credit costs (at 74 bps), after factoring utilisation of Rs 2 billion contingent provisions. Loan growth was led by retail and commercial business portfolios (up 4.5%/6% QoQ). Deposits traction at 19% YoY and 4% QoQ remains superior to industry.

We believe HDFC Bank can deliver ~2% return on asset on a sustained basis, even post the merger with Housing and Development Finance Corporation Ltd. Clarity on regulatory dispensations remain awaited.

Click on the attachment to read the full report:

Dolat Capital HDFC Bank Q3FY23 Result Update.pdf
Opinion
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