HDFC Bank and ICICI Bank will kick off the banking sector’s March-quarter earnings season on Saturday, with brokerages expecting a stable performance but watching closely for management commentary on margins, growth and macroeconomic risks from the West Asia war.
For HDFC Bank, the spotlight will be on leadership developments following the exit of former part-time chairman Atanu Chakraborty on 18 March. Chakraborty had resigned with immediate effect from the board, citing “certain happenings and practices within the bank” that were “not in congruence” with his personal values and ethics, prompting questions on oversight and internal controls at trhe country's largest private bank.
Following his resignation, HDFC Bank, in a late-night announcement, said the Reserve Bank of India (RBI) had approved the appointment of board member and HDFC Group veteran Keki Mistry as an interim part-time chairman for three months from 19 March. Chakraborty’s departure comes at a time when the lender is navigating balance sheet adjustments after its merger with erstwhile HDFC Ltd, an elevated credit-deposit (CD) ratio and near-term margin pressures.
HDFC Bank
Brokerages expect the lender's growth trajectory to remain broadly stable. Led by stable loan growth, it is expected to report 7% year-on-year and 2% quarter-on-quarter rise in net profit for the quarter ended 31 March at ₹19,053 crore, according to a Bloomberg poll.
However, margin trends will be closely watched, with Nomura Global Markets Research expecting a 4-basis-point on-quarter fall in net interest margin (NIM) due to the transmission of the last repo rate cut in December.
In the quarter ended 31 December, HDFC Bank’s net interest income (NII) stood at ₹32,600 crore, up 6% on-year. Consequently, NIM stood at 3.35%, up from 3.3% a quarter ago.
Provisional numbers disclosed by HDFC Bank showed loans expanded at 12% on-year in the fourth quarter and deposits grew 14.4% as against 11.6% and 11.9% in the December quarter. Analysts believe these numbers would assuage investor concerns raised by Chakraborty's abrupt exit.
“The provisional numbers would be reassuring for those investors who assess the bank's performance on any of these metrics: headline deposit growth—given the clear improvement from last quarter (on a year-on-year basis), and loan deposit ratio (LDR)—the improvement in deposit growth has translated to an improvement in LDR too, and it has dropped by over 400bps,” analysts at Sanford C. Bernstein (India) said in a 4 April note to clients.
ICICI Bank
ICICI Bank, on the other hand, is expected to deliver relatively stronger and more consistent performance. According to a Bloomberg poll, the private lender is expected to report a net profit of ₹12,930 crore, up 2% on-year. For the third quarter, the bank’s bottom line was at ₹11,318 crore.
Motilal Oswal Financial Services expects the bank's loan growth to remain healthy and increasingly broad-based, with margins resilient at 4.3% and best-in-class asset quality.
Centrum Institutional Research expects near-term earnings momentum to remain robust as it has estimated a 4.5% rise in NII on a sequential basis and earnings to rise by 14% on-quarter due to improvement in credit cost.
That said, some margin moderation is likely. Nomura expects the bank’s NIMs to decline by 2bps on-quarter due to the transmission of the repo rate cut. Systematix Institutional Equities said the NIM will be marginally lower for the bank as yield on assets softens faster than the cost of deposits.
For the December quarter, the bank’s NII stood at ₹21,932 crore, up 8% on-year and NIM at 4.30%, unchanged from the previous quarter.
Motilal Oswalexpects the bank to deliver steady compounding, with returns on assets and equity at 2.3% and 16%, respectively.
Across both lenders, investors will closely monitor commentary on the second-order impact of ongoing geopolitical tensions and RBI's tightening of net open position (NOP) norms, which could influence liquidity, funding costs and treasury performance.
System-wide trends also point to persistent funding pressure, with JM Financial highlighting that the CD ratio for its coverage universe has risen to 85.5% in the fourth quarter, while private banks continue to operate at elevated levels, led by HDFC Bank at 97.3% and ICICI Bank at 87.6%.
