HDFC Bank Q3 NII may grow 5% QoQ, deposit costs to hit margins

HDFC Bank, ICICI Bank and Punjab National Bank offers 7.50 percent interest on three-year FDs for senior citizens. A sum of Rs 1 lakh invested grows to Rs 1.25 lakh in three years.

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26 Aug, 2025 12:21

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Private sector lender HDFC Bank is likely to clock a 5 percent sequential growth in net interest income (NII) in the October-December quarter  of the ongoing financial year, led by strong growth in advances or credit, analysts have said.

The lender's net profit, however, is expected to remain flat as higher cost of funds weighing on margins when it announces the Q3 number on January 16.

According to an average of estimates of five brokerages, HDFC Bank's NII in is expected at Rs 28,846 crore up from Rs 27,385 crore in the previous quarter. Its net profit is pegged at Rs 15,910 crore against Rs 15,976 crore in the July-September period. The year-on-year (YoY) figures are not comparable owing to the merger with HDFC.

High deposit costs to hit margins; asset quality stable

The rising cost of deposits or borrowing costs (around 24-25 percent QoQ) is expected to dent the net interest margin (NIM) profile of HDFC Bank amid lower interest income, analysts said.

NIMs are expected to contract by 10 basis points (bps) to 3.6 percent in the December quarter from 3.7 percent in Q2.

One basis point is one-hundredth of a percentage point.

Despite rising cost of deposits across the banking industry, HDFC Bank will be able to cushion the blow to margins due to excess liquidity driven by merger impact, analysts at Dolat Capital said.

On the asset quality front, no major change would be seen in gross non-performing assets (GNPAs) from the previous quarter. Analysts at Motilal Oswal pegged gross NPA at 1.3 percent in Q3FY24, stable as compared to Q2. Net NPA is likely to be steady too at 0.4 percent.

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Business update

HDFC Bank's gross advances were up 5 percent from the previous quarter at Rs 24.6 lakh crore. While domestic retail loans grew around 3 percent, commercial and rural banking loans climbed by 6.5 percent, the bank said in business update.

The private lender's deposits were up by a moderate 2 percent QoQ, retail deposits were up 3 percent and wholesale deposits 3.4 percent.

The management commentary on business growth and margin trajectory would be the key factors for investors to watch out in the Q3.

ALSO READ: Banks may face pressure on interest margins as growth momentum in credit, deposits continues

Stock performance

In the October-December quarter, HDFC Bank surged 12 percent, outperforming the Bank Nifty index that rose 4 percent. In the past year, the stock has, however, underperformed the banking index, which gained  7 percent against HDFC's 4 percent, data shows.

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