MUMBAI: HDFC Bank, which had delivered over 30% net profit growth for 54 consecutive quarters until fiscal 2013, has seen growth slip to single digits following its merger with its parent in July 2023. However, the bank broke this low-growth streak in the three months ended December, reporting an 11.5% increase in standalone net profit to Rs 18,650 crore, up from Rs 16,736 crore a year earlier. The improvement was driven by double-digit loan growth, higher interest income, and stable asset quality.
At its peak, HDFC Bank, which is the second largest lender with close to Rs 41 trillion balance-sheet, had set a record of sort with more than 30% net profit growth for as many as 54 quarters without a break till the June 2013 quarter.
Since then the first return to the 30% plus rate was in in Q1 of FY24 but then came the reverse merger with the parent HDFC effective July 1, 2023, forcing the largest private sector bank to manage loan-to-deposit ratios, and has been in fact degrowing its books to stablise this margins.
The bank management, led by the chief financial officer Srinivasan Vaidyanathan, told reporters on a concall Saturday that the bank will grow with the industry this fiscal both in deposits and advances and will return to the industry-beating growth numbers which it used to be for decades, from the next fiscal as it hopes to bring down its high credit deposit ratio which for the reporting quarter stood at a high 98.7.
The net income would have been higher by Rs 800 crore, which has been made as a provision for likely employee cost escalation under the new labour code, Vaidyanathan said.
The bank said net interest income grew 6.4% to Rs 32,620 crore on steady growth in core earnings, healthy deposit accretion and stable asset quality, even as margins remained under some pressure, while asset quality remained stable with the gross NPAs improving to 1.24% from 1.42% last year and the net NPA declined to 0.42 percent from 0.46 percent.
In absolute terms, GNPA stood at Rs 35,179 crore, compared to Rs 36,019 crore a year earlier and the net NPAs declined to Rs 11,982 crore from Rs 11,588 crore a year ago,.
While the core net interest income grew 6.4% to Rs 32,620 crore from Rs 30,650 crore in the year-ago quarter, the core net interest margin stood at 3.35% on total assets and 3.51% on interest-earning assets during the quarter.
Ahead of the quarterly results, the HDFC Bank counter had rose 0.55% to Rs 930.55 on Friday. The stock has gained 13.7% in the last one year, outperforming the Nifty, which has returned less than 11% during the same period.
Operating expenses for the quarter were Rs 18,770 crore. Excluding an estimated Rs 800 crore impact from employee benefits under the new labour code, operating costs stood at Rs 17,970 crore, compared with Rs 17,110 crore in the year-ago period. The bank’s core cost-to-income ratio was 39.2 during the quarter, Vaidyanathan said.
Provisions and contingencies amounted to Rs 2,840 crore for the quarter, shrinking over 10% on-year. This was helped by the release of contingent provisions of Rs 1,040 crore, primarily related to a large borrower group meeting specific conditions. Excluding this release, total credit cost ratio was 0.55 for the quarter.
Vaidyanathan refused to set a NIM target for the year, stating the margin depends on many factors including cost of funds and yield on advances, which declined from 8.3% in December 2024 t0 7.8% in December 2025, while the cost of funds declined from 4.9% to 4.5% during this period. This is more so as, as much as 70% of its loans are repo-linked now where rate transmission is faster.
Similarly he also refused to put a target for CDR reduction from the current 98.7, saying our glide path is bring it down to a reasonable level.
Other income or non-interest income for the quarter was Rs 13,250 crore of which the four components of that constitute the other income were fees & commissions of Rs 9,230 crore, up from Rs 8,180 crore, forex & derivatives revenue of Rs 1,430 crore up from Rs 1,400 crore, net trading and mark to market gain of Rs 930 crore up from Rs 700 crore, and miscellaneous income, including recoveries and dividend of Rs 1,660 crore, down from Rs 1,790 crore.
On the balance sheet, total size expanded to Rs 40.89 trillion from Rs 37.59 trillion a year earlier.
End-of-period deposits stood at Rs 28.6 trillion, up 11.6% of which the low-cost Casa deposits increased 10.1% to Rs 9.61 trillion, comprising 33.6% of total deposits and time deposits grew 12.3% on-year to Rs 18.99 trillion.
Gross advances were Rs 28.45 trillion, reflecting an 11.9% on-year increase. Advances under management grew 9.8% over the previous year, with retail loans rising 6.9%, small and mid-market enterprises loans growing 17.2%, and corporate and other wholesale loans increasing 10.3%. Overseas advances accounted for 1.7% of total advances, said Vaidyanathan.
The capital position remained strong, with total capital adequacy ratio at 19.9% under Basel III norms, well above the regulatory requirement of 11.9% and the tier-1 capital adequacy stood at 17.8%, while the common equity tier-1 ratio at 17.4.