HDFC Bank vs SBI: A deep dive into profitability, growth and strategy

But how do they stack up against each other in the private vs. public banking space? Let’s break it down by comparing their key metrics.

Revenue and profitability

HDFC Bank reported a net revenue of ₹76,040 crore for Q2FY25, reflecting a strong 14.7% YoY growth. Its profit after tax (PAT) stood at ₹17,830 crore, showcasing a moderate YoY growth of 6.1%. Meanwhile, SBI’s net profit was slightly higher at ₹18,331 crore, with a much stronger YoY increase of 27.92%. This indicates that SBI has recently gained momentum in profitability.

Net interest margin (NIM)

The NIM, which measures the difference between interest income and expenses as a percentage of total assets, highlights the efficiency of a bank’s core lending operations. HDFC Bank’s NIM stood at 3.46% in Q2FY25, higher than SBI’s NIM of 3.18%. For domestic operations, SBI’s NIM was 3.31% in H1FY25. These figures highlight HDFC Bank’s ability to generate better margins from its lending activities.

Return metrics

Return on Assets (ROA) and Return on Equity (ROE) measure how effectively a bank utilizes its resources. HDFC Bank achieved an ROA of 1.93% and ROE of 14.7% in Q2FY25. While SBI reported these metrics on a half-yearly basis, its ROA lagged at 1.13% (H1FY25), but its ROE excelled at 21.78% (H1FY25).

Non-performing assets (NPAs)

The Gross Non-Performing Assets (GNPA) ratio indicates the percentage of loans in default. HDFC Bank’s GNPA ratio was a low 1.36% in Q2FY25 (excluding agriculture, it was 1.19%), whereas SBI’s GNPA ratio was higher at 2.13%. Both banks, however, demonstrated excellent control over stressed assets, with net NPAs below 0.6%.

Capital adequacy

The Capital Adequacy Ratio (CAR) reflects a bank's ability to withstand potential losses. HDFC Bank’s CAR stood at a robust 19.8%, significantly higher than SBI’s 13.76%. This positions HDFC Bank better to absorb unexpected shocks.

Growth dynamics

HDFC Bank recorded a healthy deposit growth of 15.5% YoY, bringing total deposits to ₹23.54 lakh crore. SBI crossed a significant milestone with deposits exceeding ₹51.17 lakh crore, reflecting a YoY growth of 14.93%.

In terms of credit growth, SBI led with a target of 14%-16% for FY25. HDFC Bank, on the other hand, expects credit growth to slow slightly in FY25 before accelerating in FY26 and beyond.

Strategic focus and outlook

HDFC Bank is prioritizing retail lending, particularly in the mortgage segment, to strengthen customer relationships. The bank is also working to lower its Loan-to-Deposit Ratio (LDR) from the current 110% to pre-merger levels of around 86%-87%, ensuring a better balance between loans and deposits. Additionally, it is adopting a cautious approach to lending, preparing for potential changes in the credit environment over the next few years.

SBI, meanwhile, is focusing on consistency and scalability, balancing corporate and retail lending to achieve its credit growth targets. The bank is also boosting deposit mobilization and increasing its CASA (current account savings account) ratio. Its management emphasized an “originate to distribute” model to recycle capital efficiently through loan distribution.

Observations

In conclusion, we can say that both banks excel in different areas. HDFC Bank appears stronger in profitability, asset quality, and capital adequacy, while SBI leads in credit growth and is aggressively expanding its operations.