HDFC Bank Ltd., ICICI Bank Ltd. and Axis Bank Ltd. are expected to report year-on-year growth in net profit for the September quarter, with analysts closely tracking net interest margins, loan growth and the impact of foreign currency non-resident (FCNR(B)) deposits on earnings.
According to Bloomberg estimates, HDFC Bank's standalone net profit is projected to rise 5.8% year on year to Rs 19,727 crore, while ICICI Bank's profit is expected to increase 16.2% to Rs 14,366 crore. Axis Bank is forecast to post a sharper 41% increase in net profit to Rs 7,180 crore.
However, the earnings outlook is not without challenges. The mobilisation of FCNR(B) deposits, which has supported balance-sheet expansion and lending growth, is also expected to weigh on margins as banks deploy these funds into loans. Differences in loan mix, funding costs and credit provisions could determine how each lender performs during the quarter.
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HDFC Bank: Margin Recovery In Focus
HDFC Bank's net interest income (NII) is expected to grow 10.9% year on year to Rs 34,992 crore, according to Bloomberg estimates. Net interest margin (NIM), however, is projected to remain unchanged at 3.27%.
Brokerages differ on the margin outlook. Nomura expects the impact of FCNR(B) deposits to become negligible, with NIM declining just 2 basis points sequentially. Motilal Oswal, meanwhile, projects an 8-basis-point contraction, citing changes in the loan mix and higher liquidity.
Loan growth will also be closely watched. Citi expects advances to increase more than 5% sequentially, translating into annual growth of 16.5%. Asset quality is expected to remain stable, with credit costs largely in the 40-50-basis-point range.
ICICI Bank: Strong Profit Growth, Higher Provisions
ICICI Bank is expected to deliver the strongest earnings growth among the three lenders, after Axis Bank, with net profit projected to rise 16.2% year on year. Its NII is estimated to increase 16.9% to Rs 25,166 crore.
The bank's NIM is forecast at 4.28%, compared with 4.36% in the June quarter. Analysts attribute the expected pressure to FCNR(B)-linked lending, excess liquidity and a higher share of corporate loans.
Nomura expects adjusted NIM to decline around 10 basis points sequentially, while Motilal Oswal sees a sharper 20-basis-point fall. Provisions are projected to rise 87.7% year on year to Rs 1,716 crore.
Analysts also caution that reported profit could decline sequentially, as the June quarter benefited from an income-tax refund, interest on that refund, higher dividend income and corporate recoveries.
Axis Bank: Sharpest Profit Growth, Margin Headwinds
Axis Bank's standalone net profit is estimated to rise 41% year on year to Rs 7,180 crore, while NII is projected to increase 11% to Rs 15,259 crore.
Despite the expected earnings growth, NIM could fall to 3.4% from 3.73% a year earlier and 3.46% in the June quarter. Citi expects a 6-7-basis-point sequential decline, while Motilal Oswal and Investec anticipate a contraction of around 12 basis points.
Citi estimates that Axis Bank could mobilise $10 billion-$11 billion through FCNR(B) deposits, accounting for more than 8% of system-wide mobilisation. The inflows are expected to support lending and deposit growth, although the associated funding costs could limit margin expansion.
Analysts expect easing credit costs and lower agricultural loan slippages to support profitability. Citi projects credit costs at around 0.7%, while Nomura expects them to normalise to approximately 65 basis points.
What Investors Will Watch
For all three lenders, the September-quarter results will offer clues about whether strong balance-sheet growth can translate into sustained earnings without further pressure on margins.
HDFC Bank's ability to revive lending momentum, ICICI Bank's margin resilience and Axis Bank's capacity to manage FCNR(B)-related funding costs will be key areas of focus when the banks announce their results.
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