HDFC Bank Q3 Results: Profit Meets Estimates, Asset Quality Worsens

A fall in provisions helped HDFC Bank Ltd. report a 2.2% year-on-year rise in profit for the December quarter to Rs 16,736 crore. The bank's bottom line met analysts' expectations of Rs 16,596 crore polled by Bloomberg.

Provisions for the bad loans fell 25% year-on-year to Rs 3,153 crore, aiding the bank's profit after tax.

Net interest income, or the bank's core income, rose nearly 8% on the year to Rs 30,650 crore. Core net interest margin stood at 3.43% for the bank and 3.62% on an interest-earning asset basis. In the September quarter, the respective figures were at 3.46% and 3.65%. The management expects the NIMs to remain range-bound and stable.

However, the private sector bank's asset quality deteriorated, with the gross non-performing assets ratio rising to 1.42% as of December, compared to 1.36% in the previous quarter. The net NPA ratio rose to 0.46% from 0.41% in the prior quarter.

The bank's gross advances rose 3% on the year to Rs 25.4 lakh crore. Retail loans of the bank grew 10% on the year, and commercial and rural banking rose by nearly 12%. Corporate and other wholesale loans fell by over 10%. Overseas advances contributed nearly 2% to overall advances.

The bank's aim has been to increase loan growth below industry levels in the current financial year, should be at par with industry in the next fiscal and higher than industry levels in 2026-27, Chief Financial Officer Srinivasan Vaidyanathan said in a post-earnings call.

"We are quite happy to be lower than industry levels in terms of credit growth...our focus right now is to reposition the balance sheet," he said.

So far, the bank has not witnessed any blip in its credit cards and unsecured loans portfolio and plans to grow unsecured loan book around 9% on year, he said.

On the bank's retail wholesale mix, Vaidyanathan said it is 58:42 as of December end, but the bank is more inclined towards growing retail book more.

Total deposits grew 16% on the year to Rs 25.6 lakh crore. Current account and savings account deposits accounted for 34% of total deposits as of the end of December.

While the bank did not provide a deposit growth outlook, Vaidyanathan said there is no calibration required. "We want to grow our deposit base and our endeavour will be to grow deposit growth faster than credit growth in FY26."

On the credit-to-deposit ratio, he said it is in the progress to bring it down to below 90% as it was before the merger with Housing Development Finance Corp, but it will take couple of years. Currently, HDFC Bank's credit-to-deposit ratio is at 98%.

Shares of HDFC Bank closed 1.42% higher at Rs 1,665.05 apiece on the BSE after the results, compared to a 0.75% advance in the benchmark Sensex.