HDFC Bank Bets On 25 Bps Hike Tailwind In Q3 As Structural Savings Shift Squeezes CASA

HDFC Bank Ltd. expects a 25-basis-point rate hike to support its net interest margins from the December quarter, as a structural shift in household savings behaviour shrinks the Current Account And Savings Account (CASA) present in the banking firm's system.

The bank's management said during its earnings call for the second quarter of the fiscal 2027 that the rate hike should provide a reversal for the fall of margins in the third quarter. It also said the underlying core business momentum remained encouraging.

ALSO READ: HDFC Bank Q2 Results: Net Profit Below Estimates, Provisions Rise Marginally

Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better Pay

It further said that it was working to reduce its reliance on corporate liabilities and bundle products to offer greater value to customers.

The bank also flagged a structural shift in household savings that is shrinking CASA deposits across the banking system. As technology adoption increases, HDFC Bank expects a change in employee composition, with greater demand for frontline staff and a lower need for certain enabling functions.

Management said improvements in technology adoption and internal processes were helping reduce turnaround times for product processing, supporting productivity and customer service.

Managing Director Shashidhar Jagdishan said he was leaving behind a solid platform with resilience as the bank continued to focus on improving operational efficiency and addressing the challenges posed by changing deposit trends.

HDFC Bank Q2 Results 

HDFC Bank's consolidated net profit rose 4.7% YoY to Rs 19,510 crore in the second quarter of financial year 2027. The net profit reported was below the estimate of Rs 19,727 crore. The net profit stood at Rs 18,641 crore a year earlier. Asset quality improved from the preceding quarter. 

Net interest income increased 10% year-on-year to Rs 34,619 crore, falling short of the Rs 34,991 crore estimate. Net interest margin, based on total assets, stood at 3.16%. The operating profit rose 5.6% to Rs 29,483 crore from Rs 27,923 crore a year earlier, below the estimate of Rs 29,868 crore.

The gross non-performing asset ratio eased to 1.11% from 1.17% in the preceding quarter, better than the estimated 1.14%. The net NPA ratio declined to 0.37% from 0.41%, compared with an estimate of 0.39%. Provisions increased to Rs 3,574 crore from Rs 3,059 crore in the previous quarter and Rs 3,500 crore a year earlier.

HDFC Bank's average advances under management grew 14.1% year-on-year to Rs 31.87 lakh crore. Gross advances at the end of September stood at Rs 32.20 lakh crore, up 16.3% from a year earlier.

Retail loans grew 11.7% year-on-year, while loans to small and mid-market enterprises increased 23.5%.  Average deposits increased 16.8% year-on-year to Rs 31.66 lakh crore. Average CASA deposits rose 10.7% year-on-year to Rs 9.71 lakh crore. 

HDFC Bank Share Price Movement 

HDFC Bank Ltd's share price saw a 0.28% uptick to settle at Rs 728.85 at the end of the day's trade, compared to a 0.65% uptick of the NSE Nifty 50.  

The stock opened at Rs 727.90, compared with its previous close of Rs 726.85. During the trading session, HDFC Bank shares moved in the range of Rs 724.30 to Rs 734.90.

ALSO READ: HDFC Bank Expects NIM To Improve From Q3 As Loan Repricing Kicks In

Over the past 52 weeks, the stock has touched a low of Rs 681.90 and a high of Rs 1,020.50. On a year-on-year basis, HDFC Bank shares are down 26.70%.

The bank's market capitalisation stands at Rs 14.84 lakh crore, while its price-to-earnings (P/E) ratio is 7.74.

Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.