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Nirmal Bang Report
HDFC Bank Ltd. reported largely in-line earnings for Q2 FY23, with the net profit increasing by 20.1% YoY, driven by 17% YoY decline in provisions.
Operating profit growth was moderate at 10% YoY as the bank reported treasury loss for the second consecutive quarter while opex remained elevated.
HDFC Bank's net interest income growth was largely led by higher credit/deposit ratio as reported net interest margin was stable at 4.1% YoY. Core profitability (excluding treasury losses) grew by 16.6% YoY and the management expects it to increase going forward, led by margin expansion and fee income growth.
Aggressive branch expansion is leading to higher opex cost and is likely to remain elevated in the short term as the focus is to expand the distribution network.
Credit cost stood at 87 basis points versus 130 bps in Q2 FY22 and is expected to remain range-bound as the bank continues to carry excess provisions. Asset quality improved on a sequential basis, led by declining delinquencies.
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