HDFC Bank’s September-quarter (Q2FY27) results may not look impressive at first glance, possibly prompting the 2.3% fall in its shares on Monday. Profit after tax grew just 4.7% year-on-year to ₹19,510 crore, as net interest margin (NIM) fell to its lowest level in 12 quarters. NIM declined 10 basis points (bps) year-on-year and sequentially to 3.16%.
The decline may partly reflect interest outgo on FCNR (B) deposits raised last quarter, even as the yield on assets fell 20 bps year-on-year to 7.6%. Notably, FCNR (B) deposits account for just 3% of HDFC Bank’s total deposits, limiting their impact on overall financials.
Slower net profit growth relative to asset base growth meant that RoA fell 10 bps year-on-year to 1.8%. Interestingly, net profit growth and RoA were impacted by a steep drop in treasury gains, which is not a part of core profitability.
Despite the NIM decline, core pre-provisioning operating profit (PPoP) grew 12.6% year-on-year to ₹28,683 crore in Q2FY27. Net interest income grew nearly 10%, as 14.4% growth in total assets compensated for margin compression. Fee and commission income rose 10% to ₹9,700 crore.
Slippages (addition of new bad loans excluding those in seasonal agricultural loans) shrank 13% QoQ to ₹5,400 crore, helping reduce overall gross NPA by 6 bps QoQ to 1.11%. While the provisioning (cost of bad debt) rose sharply by 15% QoQ to ₹3,574 crore, it is more because of general provision on standard assets. So, it is not worrisome.