HDB Financial Shares Slide As Q1 Profit Declines — Buy, Sell Or Hold?

Shares of HDB Financial Services declined by 3.68% in early trade on Wednesday after the company reported a 2% year-on-year drop in net profit for the quarter ended June 2025.

The stock came under pressure despite a solid rise in revenue and operating performance, as investors reacted to rising provisions and deteriorating asset quality.

The non-banking financial arm of HDFC Bank posted a net profit of Rs 568 crore, down from Rs 582 crore in the same quarter last year. While profit fell marginally, the company’s net interest income (NII) rose sharply by 18% YoY to Rs 2,092 crore, supported by healthy loan growth and improved yields. Operating profit also grew 18% YoY to Rs 1,388 crore.

However, the bottom line was weighed down by a 63% surge in provisions, which rose to Rs 670 crore from Rs 412 crore a year ago. Asset quality showed signs of stress, with the gross NPA ratio climbing to 2.56% from 2.26% sequentially, and net NPA rising to 1.11% from 0.99%.

Other key metrics showed mixed trends. Return on assets slipped 10 basis points to 1.9%, while net interest margin improved slightly to 7.7%. The cost-to-income ratio remained stable at 42.7%, and credit cost edged up to 2.5%.

Despite strong topline growth, the market appears concerned about rising credit risk and provisioning trends, which could weigh on near-term sentiment.