💡If you are wondering why the shares of HDFC Bank are falling📉 despite posting good earnings performance for Q3, Let’s understand 👇🏻
🔹HDFC Bank posted a robust 33.4% YoY net profit rise at ₹16,372 Cr.
🔹Q-o-Q comparison of numbers-
👉🏻Net profit: Rs 16,373 crore vs Rs 15,976 crore. 👉🏻Net interest income: Rs 28,471 crore vs Rs 27,385 crore. 👉🏻Gross NPA: 1.26% vs 1.34%. 👉🏻Net NPA: 0.31% vs 0.35%. 👉🏻Capital adequacy ratio: 18.39% vs 19.54%.
🤯The bank disappointed on 2 metrics that mattered-- loan to deposit ratio and net interest margin change.
🔹The Bank reported the worst Net Interest Margin(NIM) in its history!
🔹Over the last many quarters, the falling NIMs were a concern:- 🏦NIM has further fallen to 3.4% this quarter.
🤔Why NIM is falling quarter on quarter?
🔹If Interest earned from its loan book is the main source of Income for a bank, interest paid on deposits is a major expense head. The difference is NIM or net interest margin. It is a measure of a bank's ability to make profits.
🔹Therefore the higher the better. But 2 factors determine the NIM, first the type of loans given (secured or unsecured) and the mandatory cash reserves required to be maintained by the bank.
🔹Therefore with HDFC merged into HDFC Bank, the secured loans proportion has increased and the consolidated NIM has fallen.
🔹HDFC Bank might need to increase the retail unsecured lending to improve its NIM.
Though the overall HDFC bank result was better than last fiscal year’s Q3 result but it couldn’t beat the estimations of the market analysts.
348.2. CSK| Link| Bookmark|
January 18, 2024 7:08:51 PM
Top Contributor (300+ Posts, 500+ Likes)
Thanks for the detailed Analysis Sir. It is very helpfull.
348.3. UjwalG| Link| Bookmark|
January 18, 2024 8:44:32 PM
IPO Guru (1300+ Posts, 600+ Likes)
Also, First YoY eps decline in a decade for the bank. Resulted into close to 2bn$ selling from fund houses. Technically, Shouldn't break 200 week avg, which is ver close. Lets see.
348.4. Kishore S| Link| Bookmark|
January 18, 2024 10:12:52 PM
Top Contributor (200+ Posts, 100+ Likes)