HDFC Bank Q1 Results Preview: Higher Provisions, Soft Loan Growth On Cards

HDFC Bank is expected to see a June quarter of high provisions on account of a one-time gain from sale of its arm HDB Financial Services, soft credit growth and continuous pressure on margins.

India's largest private sector bank is set to announce its April-June earnings on Saturday.

According to a poll by Bloomberg, the bank is likely to report standalone profit after tax of Rs 17,652 crore, up over 9% on year. The bank's bottomline was Rs 17,616 crore a quarter ago.

HDFC Bank Q1 FY26 Estimates (Standalone, YoY)

• Net profit seen up over 9% at Rs 17,652 crore

• NII seen rising 7% to Rs 31,910 crore

• NIM seen at 3.35%, lower than 3.54% QoQ

• Provision seen at Rs 3,271 crore

The bank will have a one-off gain of Rs 9,373 crore from the initial public offering of its arm HDB Financial Services, Systematix Institutional Equities said, adding that it expects the lender to make additional prudential provisions of Rs 6,000 crore.

"Provisions will be higher on sequential basis as the bank will utilise gain on sale of HDB Financial Services shares to increase floating provision," Yes Securities said in a note.

Analysts at Bloomberg expect the bank's provisions at Rs 3,270.8 crore. During the March quarter, provisions at the bank had plunged 76% year over year to Rs 3,193.05 crore.

While softer credit growth has reduced the bank's credit-to-deposit ratio, the headline reported number was slower than average industry loan growth of 5% on year. The bank's CD ratio has improved to 95% on quarter, Kotak Institutional Equities said.

Slower loan growth will also impact the bank's net interest income due to fall in yield on advances outpacing cost of deposits, Yes Securities said.

Analysts polled by Bloomberg expect the bank's NII at Rs 31,910 crore in the June quarter, up 7% on year.

Consequently, net interest margin is seen at 3.35%, lower than 3.54% in the prior quarter as loans re-price faster in this quarter.

Overall, asset quality is expected to remain healthy. However, slippages may rise sequentially led by seasonally high agricultural slippages.

"We expect gross non-performing assets ratio to be stable with slippages at 1.3% of loans," Kotak Institutional Equities said.

Analysts will watch out for management commentary on the progress of NIM and growth outlook.