HDFC Bank Q1 FY26 Performance Review
| Metric | Q4 FY25 | Q1 FY26 | Change |
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Introduction
It’s been an interesting journey for HDFC Bank shareholders, hasn’t it?
Many of us have watched it with keen interest, especially those who experienced the stock’s performance from 2022 to 2024. It was a period where the stock underperformed even its peers and the broad index.
But now, as we look into the Bank’s financial results for the quarter ended June 30, 2025 (Q1 FY26), there’s a fresh story unfolding.
These latest figures offer some compelling insights into the Bank’s resilience and strategic direction.
Overall Performance
The Bank’s standalone net revenue for Q1 FY26 stood at a robust Rs.531.7 billion. This represents a significant jump of 31.2% compared to the same quarter last year.
A substantial part of this growth, Rs.91.3 billion, came from transaction gains. This gain was specifically from a partial divestment through an offer for sale in the recent IPO of HDB Financial Services Limited (HDBFS). HDB Financial is a subsidiary of HDFC Bank (read about this IPO here).
What about profitability?
The Bank reported a profit after tax (PAT) of Rs.181.6 billion for the quarter. This is a solid 12.2% growth over the quarter ended June 30, 2024.
The standalone Earnings Per Share (EPS) for the quarter was Rs.23.71. These numbers suggest that HDFC Bank is navigating the financial landscape effectively. In March’25 quarter, the EPS was at Rs.23.03
The Income Drivers
Let’s talk about Net Interest Income (NII) first. This is the core earning for any bank.
What is NII? It is the difference between interest earned and interest expended.
For Q1 FY26, the Bank’s NII grew by 5.4% year-on-year, reaching Rs.314.4 billion.
The core net interest margin (NIM) was 3.35% on total assets. It’s interesting to note that this is slightly lower than the 3.46% reported in the previous quarter (March 31, 2025).
This trend, where assets are repricing faster than deposits, is something the Bank is actively managing.
Beyond NII, the “Other Income” component truly grew fast this quarter. At Rs.217.3 billion, it more than doubled year-on-year, growing by 103.7%. As we mentioned, a significant chunk of this “other income” was the Rs.91.3 billion gain from the HDBFS IPO.
Other notable contributors to this income include the following:
- Fees & commissions (Rs.75.9 billion),
- Foreign exchange & derivatives revenue (Rs.16.3 billion), and
- Miscellaneous income, including recoveries and dividends (Rs.24.0 billion).
I think, this diversification of income streams is a positive sign.
The Foundation: Deposits and Advances
A bank’s strength often lies in its deposit base.
For HDFC Bank, average deposits for the June 2025 quarter were Rs.26,576 billion, marking a healthy 16.4% growth year-on-year.
What’s more, end-of-period (EOP) deposits also saw a 16.2% increase over June 30, 2024, reaching Rs.27,641 billion.
The Bank’s Current Account Savings Account (CASA) deposits also grew, with savings account deposits at Rs.6,390 billion and current account deposits at Rs.2,980 billion.
- Time deposits, on the other hand, surged by 20.6% year-on-year.
- The CASA ratio stood at 33.9% of total deposits as of June 30, 2025.
It’s important to remember that attracting and retaining low-cost deposits like CASA is a continuous effort in a competitive market.
On the lending front, the average advances under management (AUM) grew by 8.3% year-on-year, reaching Rs.27,423 billion for the June 2025 quarter.
Gross advances stood at Rs.26,532 billion as of June 30, 2025, showing a 6.7% increase over the previous year.
The Bank has a diverse loan book:
- Retail loans growing by 8.1%,
- Small and mid-market enterprises loans by 17.1%, and
- Corporate and other wholesale loans by 1.7%.
I think, this is a balanced growth across segments. For me, for a bank as big as HDFC, these are good indicator of diversified risk.
Asset Quality and Provisions
This was the area which effected Axis Bank in the recent quarter and its stock price fell by 10% (read about it here).
Asset quality is always a key focus for any financial institution.
- The Gross Non-Performing Assets (GNPA) ratio was 1.40% of gross advances as on June 30, 2025.
- Excluding NPAs in the agricultural segment, this ratio was 1.14%.
- The Net Non-Performing Assets (NNPA) were 0.47% of net advances.
These figures demonstrate a stable asset quality across segments.
What’s noteworthy is the Bank’s approach to provisions.
During this quarter, the Bank made a significant floating provision of Rs.90.0 billion, along with additional contingent provisions of Rs.17.0 billion.
These provisions are not specific to any particular portfolio or anticipated risks. Rather, they serve as a countercyclical buffer to enhance the balance sheet’s resilience.
This proactive step, increasing total provisions to Rs.144.4 billion for the quarter, indicates a prudent risk management strategy, making the balance sheet stronger.
Capital Position and Subsidiary Contributions
HDFC Bank maintains a robust capital position.
The total Capital Adequacy Ratio (CAR) as per Basel III guidelines stood at 19.9% as of June 30, 2025. This is well above the regulatory requirement of 11.9%.
The Common Equity Tier 1 (CET1) Capital ratio was also strong at 17.4%.
A healthy capital cushion like this provides confidence to all stakeholders.
The Bank’s key subsidiaries also play a vital role in its overall performance. For instance:
- HDB Financial Services Ltd (HDBFS), where the Bank holds a 74.2% stake, reported a profit after tax of Rs.5.7 billion for the quarter.
- HDFC Life Insurance, with the Bank holding a 50.3% stake, saw its profit after tax grow by 14.4% to Rs.5.5 billion.
- HDFC ERGO General Insurance, also 50.3% owned by the Bank, showed an impressive 56.4% growth in profit after tax, reaching Rs.2.1 billion.
- HDFC AMC, with a 52.4% stake, recorded a profit after tax of Rs.7.5 billion, a 24% growth.
- HDFC Securities, where the Bank holds 94.4%, reported a profit after tax of Rs.2.3 billion.
These subsidiaries collectively contribute to the consolidated performance. The consolidated profit after tax for Q1 FY26 was Rs.162.6 billion.
Future Outlook
The Q1 FY26 results for HDFC Bank presents a picture of stability and strategic progress.
The Bank is clearly focusing on strengthening its balance sheet and maintaining disciplined growth across diverse segments.
The proactive provisioning further enhances its resilience.
With a strong capital base, a diversified revenue profile, and consistent growth in deposits and advances, HDFC Bank appears to be building on a solid foundation.
As shareholders, both existing and prospective, understanding these underlying strengths and strategic moves is crucial. The journey continues, and these results certainly offer a reason for optimism.
What are your thoughts on these figures? I request you to share your views in the comments below.
