HDFC Bank Ltd.'s net profit in the July-September quarter beat analyst estimates. However, the private lender's earnings per share growth for the period was lower than in previous quarters.
The bank's net profit was up 50.6% year-on-year to Rs 15,976 crore, as compared with Rs 10,605 crore a year ago. It surpassed the Bloomberg estimate of Rs 14,120 crore.
HDFC Bank's EPS grew 10.8% YoY in Q2 FY24, which is significantly lower than around 20% growth seen in the previous quarter.
Since this is the first quarterly result after its merger with parent Housing Development Finance Corp., the figures are not strictly comparable, as clarified by the management.
HDFC Ltd. also had an average EPS growth rate of up to 17% before the merger.
The EPS growth was slower due to pressure on margin and the impact of incremental cash reserve ratio, according to Shivaji Thapliyal, head of research at Yes Securities (India) Ltd.
"Furthermore, the erstwhile HDFC Ltd.'s wholesale book impacted both growth and asset quality to some extent. However, the excess liquidity will be unwound. Secondly, erstwhile HDFC Ltd.'s wholesale book has largely bottomed out, both in terms of growth and asset quality outcomes," he said.
The bank's net interest margin was 3.4% on Sept. 30, down from 4.1% on June 30. This decline was primarily attributed to HDFC Ltd.'s debt financing for liquidity before the merger, said Srinivasan Vaidyanathan, chief financial officer of HDFC Bank.
Since the announcement of the merger in April 2022, the bank has so far underperformed the benchmark Nifty 50. While the stock has advanced 2.29% over this period, the Nifty 50 has witnessed gains of over 12%.
Shares of HDFC Bank closed 0.76% higher at Rs 1,541.20 apiece, as compared with a 0.40% advance in the Nifty on Tuesday.
Of the 48 analysts tracking the company, 44 maintain a 'buy' rating and four suggest a 'hold'. The 12 month target price stands at Rs 1,954, which is a 27% return potential.
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