HDFC Bank Q1 Preview: NII to grow in single-digit amid slower loan growth, margins may compress

India's largest private lender HDFC Bank is likely to see single-digit net interest income (NII) and profit growth amid soft loan growth, while margins are expected to remain under pressure due to faster repricing of loans on account of interest rate cuts, said analysts. The bank will report Q1 results on July 19, 2025.

According to Moneycontrol's poll, HDFC Bank’s net interest income is likely to rise 7 percent year-on-year, reaching about Rs 31,885 crore in Q1FY26, compared to Rs 29,837 crore in the same period last year. The bank’s profit after tax (PAT) is also projected to grow modestly by 7.4 percent, to approximately Rs 17,385 crore, up from Rs 16,174 crore a year ago.

Estimates of analysts polled by Moneycontrol are shown to be in a narrow range, meaning any positive or negative surprises may elicit a sharp reaction in the stock price. Among the brokerages polled, Kotak Institutional Equities rolled out the most bullish projections while Equirus Research forecasted the slowest growth for HDFC Bank.

Fast deposit growth, but slower credit offtake: HDFC Bank reported that its average gross advances stood at about Rs 26 lakh crore as of June 30, 2025, showing a growth of roughly 6.7 percent over Rs 24 lakh crore in the year-ago period. Meanwhile, deposits rose more sharply, climbing 16.2 percent to Rs 27.6 lakh crore from Rs 24 lakh crore as of June 30, 2024.

Margin compression: Analysts at Kotak believe that the bank’s net interest margin (NIM) is likely to drop by 31 basis points year-on-year, settling at 3.4 percent in Q1FY26 compared to 3.5 percent a year earlier. This is due to quicker loan repricing during the quarter.

Higher provisions: Provisions are expected to be higher sequentially, as the bank plans to use the gains from the sale of shares in HDB Financial Services to increase floating provisions. Systematix Institutional Equities noted that HDFC Bank will book a one-time gain of Rs 9,373 crore from HDB’s IPO and may allocate around Rs 6,000 crore for additional prudential provisions.

Investors are likely to focus on deposit growth, loan growth, and margin trends to assess the bank’s outlook.

During the April-June period, shares of HDFC Bank gained 9 percent, outperforming the benchmark Nifty 50 index, which rose 5 percent during the same time.