HDFC Bank Q1 Results: Profit Beats Estimates Despite Higher Provisions

Despite higher provisions, HDFC Bank Ltd. reported a healthy growth in standalone net profit in the first quarter of financial year 2026, beating street expectations.

Profit after tax rose 12% year-on-year to Rs 18,160 crore, exceeding the consensus estimates of analysts polled by Bloomberg, which forecast Rs 17,652 crore.

Provisions and contingencies against bad loans rose to Rs 14,441 crore as against Rs 2,602 crore a year ago. Ostensibly, the bank utilised proceeds from the initial public offering of its arm HDB Financial Services Ltd. to make floating provisions, also described as additional prudential provisions against bad loans. The floating provision stood at Rs 9,000 crore during the quarter.

The bank received a net gain of Rs 9,128 crore on account of the sale of shares of HDB Financial before tax and net of the estimated related expenses for the initial public offering.

The bank said it did not make these provisions based on any anticipation of stress in any loan assets but as a precautionary measure.

The asset quality of India's largest private lender worsened slightly as gross non-performing assets ratio rose to 1.4% at the end of June quarter compared with 1.33% in the previous quarter. Net NPA also rose 0.47% from 0.43% in the March quarter.

HDFC Bank's net interest income rose 5% on a year-on-year basis to Rs 31,438 crore.

The core margin, or net interest margin, contracted to 3.35% from 3.46% in the quarter ended March. This was anticipated given the reduction in policy interest rates by the Reserve Bank fo India this year.

On an interest-earning asset basis, margins were at 3.5% from 3.73%. In the June quarter, NIM was at 3.4% from 3.54% on total assets.

Overall, loan book grew nearly 7% to Rs 26.53 lakh crore. Within this, retail loans grew by 8.1%, small and mid-market enterprises loan book rose by 17.1% while corporate and wholesale loans rose by merely 2%.

Answering a query on corporate loans, Chief Financial Officer Srinivasan Vaidyanathan said in a post-earnings call that the bank is getting lower yields from large and better rated corporates with good balance sheets, amid competitive pricing.

"While we like the quality but we have been selective in offering loans but we are waiting for the rates at which we lend to larger corporates to be stable," Vaidyanathan said.

On overall loan growth, he said the bank's aim has been to increase loan growth at par with industry levels in 2026-27 which has been growing at around 9-10%.

The bank's average deposits were at Rs 26.57 lakh crore, up 16.4% on year. He expects deposit growth momentum to continue and gain historical market share.

The bank's credit-to-deposit ratio is at 96% at the of June quarter as compared to 97.3% a quarter ago, as per NDTV Profit's calculation.

In the medium term, the bank wants CD ratio to be between 85-90%, Vaidyanathan said.