My take on the results
They were slightly disappointing mainly because of the margins, despite exhausting their excess liquidity they margins remained flat
I think this is mainly because of a high liquidity crunch in the system, hdfc being such a large bank cannot get deposit until system liquidity improves, once the casa ratio comes back to 40% margins will improve but I feel it won’t easily go back to 4% plus because of the housing and wholesale loans they’re doing now. That is also not bad because while top like is lower, opex and credit cost will also be lower keeping the bottom line similar
In terms of loan quality there is absolutely nothing to complain about, credit cost is very low and they have such large provision buffers and adjustments that it really won’t be an issue unless something seriously goes wrong.
My feeling is that things will be tight till June, income tax payment and cash withdrawals for elections will take liquidity out of the system and psl requirement for 1/3 of the hdfc book start in April. Post the election the government might start spending and the RBI might inject liquidity into the system, plus the bond inclusion money will come in and then the margins will improve
Despite the low margins they still managed an RoA of 2% and RoE of 15%, income tax write backs were mostly used for provisions. Even if it doesn’t rerate, it should give a steady 15% kind of return once things settle down inline with the RoE
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