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Informist, Thursday, Oct. 16, 2025

 

By Priyasmita Dutta

 

NEW DELHI – HDFC Bank Ltd. is expected to outperform its peers and be an outlier to the industry-wide trend of muted profitability from margin compression, subdued loan growth, and lack of support from treasury income. The lender's calibrated growth in business, lower margin contraction compared to the June quarter, and lower credit cost is expected to support its earnings growth, brokerages tracking the lender said.

 

"We expect 2QFY26 (Jul-Sept) to be the weakest quarter of this earnings cycle for banks, with sector profitability bottoming out before a recovery in 2HFY26 (Oct-Mar)," JM Financial Institutional Securities Pvt. Ltd. said. "We believe this quarter will mark the inflection point, with earnings momentum set to improve from 3QFY26 (Oct-Dec) as margin pressure eases and growth/asset quality trends improve," it added.

 

"Among large PVBs (private sector banks), we prefer HDFCB (HDFC Bank) due to a steady improvement in its growth and earnings trajectory, followed by a resilient ICICIB (ICICI Bank)," Emkay Global Financial Services Ltd. said in a pre-earnings report and added that among the private sector lenders, HDFC Bank will be one of the few banks to report lower margin contraction. Analysts expect most banks to pass the Reserve Bank of India's 100 basis points of rate cuts in the September quarter, leading to a fall in net interest margin in the quarter.

 

The largest private sector lender is expected to report a 4.1% rise in net profit for the September quarter to INR 175.11 billion, according to the average of estimates from 11 brokerages. However, sequentially, the net profit is seen falling 3.6%. JM Financial Institutional Securities has the lowest estimate for net profit at INR 164.36 billion, while Anand Rathi Share and Stock Brokers Ltd. has the highest at INR 186.94 billion. HDFC Bank is scheduled to report its September quarter earnings on Saturday.

 

HDFC Bank's net interest margin is likely to fall by 12-30 basis points on a year-on-year basis to 3.26-3.53%, according to estimates from seven brokerages. Sequentially, the fall will be to the tune of 5-14 bps. HDFC Bank's core net interest margin in the trailing quarter was 3.35%, reflecting assets repricing faster than deposits, as against 3.46% for the prior quarter. "We are building NIM to decline due to faster re-pricing of loans this quarter," Kotak Securities Ltd. said.

 

HDFC Bank's net interest income for the quarter under review is expected to be INR 313.95 billion, up 4.3% on year. Sequentially, it is seen almost flat, according to an average of estimates from 11 brokerages. Estimates for net interest income ranged between INR 307.48 billion and INR 318.80 billion.

 

Brokerages broadly agreed that loan growth was lacklustre industry-wide, but HDFC Bank's loan growth during the quarter would be better than the industry average. HDFC Bank's credit-deposit ratio is also seen improving with the bank consciously choosing to go slow on credit growth during the quarter, brokerages said. 

 

"The headline reported number was slower-than-industry- average on loan growth (around 5% yoy) as strong efforts are being made to improve their CD ratio. CD ratio has improved qoq to (around) 95%," Kotak Securities said. "Deposits grew strong at 16% yoy," it added. Based on the provisional advances and deposits data released by the largest private sector bank, its credit-deposit ratio was 98.8% at the end of September, from 100.8% last year, Nirmal Bang Equities Pvt. Ltd. pointed out.

 

HDFC Bank's credit-to-deposit ratio had soared over 100% following the amalgamation with Housing Development Finance Corp. Ltd. in July 2023. Since then, the bank has been actively working to lower the ratio further by growing deposits faster than loans. HDFC Bank's gross advances were up 9.9% on year at INR 27.69 trillion as on Sept. 30. Deposits at the end of September grew more than advances, rising 12.1% on year to INR 28.02 trillion.

 

Brokerages expect credit cost for the September quarter to remain benign, supported by robust asset quality. Slippages would also be lower on sequential basis due to seasonality, they said. "Slippages to trend down due to lower KCC NPAs (Kisan Credit Card non-performing assets)," Emkay said. The Kisan Credit Card scheme is a government initiative that provides farmers credit for their agricultural, animal husbandry, fisheries and allied activities.

 

"However, concerns are now emerging in MSME space – mainly in low ticket unsecured business loan and micro-LAP (loan against property) segment," Emkay said. "These products mainly serve new-to-credit or vulnerable borrowers whose repayment capacity is closely linked to cash-flow cycles and is sensitive to external shocks."

 

Key developments to look out for will be the management's outlook on margins and loan and deposit growth. "Near term focus would be the progress of NIM (NIM to improve slower-than-expected), growth outlook, and impact of priority sector lending (in FY2026)," Kotak Securities said.

 

Since the bank announced its June quarter results, its stock has fallen 2%. At 1401 IST, the stock was trading at INR 991.45 on the National Stock Exchange, up 1.4% from Wednesday. All 24 brokerage reports on the large lender available with Informist have a 'buy' rating on the stock with an average target price of INR 2,104 per share.

 

HDFC Bank had reported a net profit of INR 181.55 billion for the June quarter, up 12% on year, supported by proceeds from stake sale in its subsidiary, HDB Financial Services Ltd. HDFC Bank is the second Indian bank in the top 100 largest banks by assets globally, at 73rd place.

 

The following are the Jul-Sept earnings estimates for HDFC Bank from 11 brokerages in descending order of the estimate of net profit in INR million:

 

Brokerage	Net Interest Income	Net Profit
Anand Rathi Share and Stock Brokers Ltd	316,728	186,941
Nirmal Bang Equities Pvt Ltd	313,257	184,933
Emkay Global Financial Services Ltd	315,611	183,285
Nuvama Wealth Management Ltd	314,400	181,162
Nomura Equity Research	318,800	175,400
Kotak Institutional Equities	310,422	173,240
ICICI Securities Ltd	316,072	171,974
Prabhudas Lilladher Pvt Ltd	316,307	169,914
YES Securities (India) Ltd	316,216	167,701
Motilal Oswal Financial Services Ltd	308,205	167,323
JM Financial Institutional Securities Pvt Ltd	307,482	164,363
Average	313,954.55	175,112.36

 

End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Ashish Shirke

 

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