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.
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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.
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