By FMTeam HDFC Bank, India’s largest private sector lender, announced its financial results for the third quarter ending December 31, 2024, reporting a standalone net profit of ₹16,736 crore ($1.94 billion). This figure aligns closely with analysts’ expectations, who had projected a profit of ₹16,748 crore.
Key Financial Metrics
- Net Interest Income (NII): The bank’s NII, representing the difference between interest earned and expended, increased by 2% sequentially to ₹30,653 crore.
- Deposits and Advances: Deposits grew by 4.2% quarter-on-quarter to ₹24.53 lakh crore, while gross advances saw a modest 0.9% increase to ₹25.43 lakh crore.
Asset Quality and Provisions
A notable concern in the quarterly performance was the deterioration in asset quality. The Gross Non-Performing Assets (GNPA) ratio rose to 1.42% from 1.36% in the previous quarter, primarily due to an uptick in non-performing agricultural loans. Additionally, slippages—loans transitioning to NPA status—increased to ₹8,800 crore from ₹7,800 crore in the prior quarter. Consequently, provisions for bad loans and contingencies escalated by 17% to ₹3,154 crore.
Analyst Perspectives and Share Price Targets
Despite the challenges, market analysts maintain a positive long-term outlook for HDFC Bank. Nirmal Bang Institutional Equities has adjusted its target price to ₹2,073 from ₹2,190, upholding a ‘buy’ rating based on the bank’s robust asset quality and growth potential. Similarly, Motilal Oswal has set a target price of ₹2,050, reflecting confidence in the bank’s future performance.
Market Reaction
Following the earnings release, HDFC Bank’s shares experienced a 1.4% increase, closing at ₹1,679.15 per share. This movement indicates investor confidence in the bank’s resilience and strategic direction.
Strategic Outlook
The recent merger with its parent company, HDFC Ltd., in July 2023, has expanded HDFC Bank’s loan portfolio significantly. However, the merger introduced challenges, notably a disparity between loan growth and deposit accumulation. To address this, the bank is focusing on accelerating deposit mobilization and optimizing its loan-to-deposit ratio to sustain growth and profitability.
Conclusion
HDFC Bank’s Q3 FY25 results reflect a stable profit trajectory in line with market expectations, despite facing asset quality pressures. The bank’s proactive measures to enhance deposit growth and maintain asset quality are pivotal as it navigates the evolving financial landscape. Analysts’ continued endorsement underscores confidence in HDFC Bank’s capacity to leverage its strong fundamentals and strategic initiatives for sustained growth