HDFC Bank Q2 Preview | Profit may rise 15% with stable asset quality and net interest margin

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26 Aug, 2025 12:21

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HDFC Bank, India’s largest private sector lender, may report standalone profit growth of 15 percent in the second quarter of this financial year, experts said.

Growth in all the bank’s key parameters is expected in double digits and its asset quality will likely be stable in the three months ended September 30.

Profit, which increased 18.4 percent to Rs 7,513 crore in the September quarter of last year, may grow with support from other income, pre-provision operating profit, net interest income and stable asset quality. Loan loss provisions are expected to remain slightly elevated compared to a year ago, but lower than in the June quarter.

The HDFC Bank stock surged in late trade on October 14 and closed at a record Rs 1,685.90, a gain of 2.86 percent, ahead of the quarterly earnings scheduled on October 16. The bank’s shares have gained 13 percent since the start of the September quarter.

Net interest income, the difference between the interest earned and expended, could rise by about 10 percent YoY on loan growth of 15.4 percent, with the net interest margin likely unchanged at 4 percent.

“We expect net interest income growth at around 11 percent YoY led by loan growth of around 15 percent YoY (weaker auto sales and lower credit card receivables growth offset by higher SME growth). We expect net interest margin to be unchanged at 4 percent. Revenue growth would be aided by non-interest income, primarily aided by a lower base,” said Kotak Institutional Equities, which expects profit to increase 15.5 percent from a year earlier.

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Prabhudas Lilladher expects 15.5 percent growth in profit and 10 percent increase in net interest income.

Advances at about Rs 11.98 lakh crore as of September grew by 15.4 percent YoY, following a 13 percent growth in retail loans, 27.5 percent growth in commercial and rural banking loans, and 6 percent growth in other wholesale loans, HDFC Bank said on October 4 while disclosing provisional numbers. Loan growth on a sequential basis was 4.4 percent.

Deposits increased 14.4 percent to Rs 14.06 lakh crore as of September from a year earlier, with growth of 17.5 percent in retail deposits and 2 percent in wholesale deposits. Quarter-on-quarter growth in deposits was 4.5 percent provisionally.

Current and savings account (CASA) deposits grew 28.6 percent to Rs 6.58 lakh crore in the second quarter. The bank’s CASA ratio was about 47 percent in September against 41.6 percent a year earlier and 45.5 percent in June.

According to Kotak, pre-provision operating profit (PPoP) growth could be about 12 percent YoY as business growth is still not normal. Prabhudas Lilladher also expects the same growth in PPoP.

Asset quality

Analysts expect a fall in slippages at HDFC Bank with better loan recovery. Asset quality is likely to improve or remain stable compared with the previous quarter.

“We expect the gross non-performing loan ratio to decline, led by lower slippages (2 percent) and better recovery (expect a bullish commentary of the recovery environment). Near-term focus would be on growth recovery of segments that would drive this growth,” said Kotak.

Asset quality in agri/unsecured book, slippages due to the second Covid-19 wave, and commentary on credit cards and fee income traction are key, said Motilal Oswal.

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