HDFC Bank Q1 results trigger 5.5% selloff; analysts highlight key positives and concerns

Shares of HDFC Bank tumbled as much as 5.41% to ₹777.50 apiece on the NSE in the early trade on Monday, July 20, following the lender's June quarter earnings (Q1 FY27) that were released on Saturday.

The country's biggest private sector lender on Saturday reported a 5% increase in standalone profit to ₹19,060 crore for the June quarter.

It had earned a net profit of ₹18,155 crore in the year-ago period.

However, the total income of the bank during the quarter under review dropped to ₹92,184 crore from ₹99,200 crore logged in the same period a year ago, HDFC Bank said in a regulatory filing.

The lender's interest income increased to ₹79,363 crore from ₹77,470 crore in the same quarter a year ago.

Welcoming new chairman Rajiv Kumar, HDFC Bank MD and CEO Sashidhar Jagdishan said the appointment has brought in a sense of stability.

Other details

During the period, operating profit of the bank declined to ₹28,169 crore, as compared to ₹35,734 crore in the same quarter a year ago.

Net interest margin (NIM) was at 3.26% on total assets, and 3% based on interest-earning assets.

On the outlook, Jagdishan said, "We are at the cusp of pushing the pedal... the environment continues to be very healthy."

About FCNR deposit mobilisation, the CEO said the rates are attractive, and the bank expects good flow by the September 30 deadline.

What analysts said

Analysts offered a mixed view on HDFC Bank's June quarter (Q1 FY27) earnings, with most retaining a positive stance on the lender's long-term growth prospects while highlighting continued pressure on net interest margins (NIMs).

Bernstein

Bernstein noted that HDFC Bank delivered another steady quarter, supported by healthy balance sheet growth and resilient asset quality trends.

The investment firm noted that margin pressures persisted as both loan yields and funding costs moved adversely, tempering net interest income (NII) growth despite robust loan and deposit accretion. It added that the bank once again relied on operating efficiency to protect profitability, while stable asset quality provided an additional cushion.

Overall, Bernstein said the results highlight a franchise that remains on a slow normalisation path, even as earnings growth continues to be constrained by ongoing margin headwinds.

Nomura

Nomura described the quarter as broadly in line with expectations and said growth momentum remains the key monitorable.

The investment firm expects the bank to benefit from FCNR-led acceleration going forward. It said margins declined sequentially as expected, while there were no surprises on operating expenses or credit costs, resulting in an in-line profit after tax (PAT).

Nomura also highlighted improving loan and deposit growth momentum and pristine asset quality, while continuing to value the bank at 1.9x its estimated FY28 book value per share.

Jefferies

Jefferies noted that HDFC Bank's Q1 profit of ₹191 billion, up 5% year-on-year, was in line with estimates.

The brokerage said a slight miss in NII was offset by lower operating expenses and credit costs. It added that the bank's increased participation in corporate lending lifted loan growth to 16% YoY, but compressed NIM by 12 basis points sequentially, limiting NII growth to 7% YoY.

According to Jefferies, slower growth in operating expenses, driven by moderated branch and employee additions, along with lower credit costs due to reduced slippages, supported profitability.

Investec

Investec, on the other hand, has termed the June quarter weak.

It pointed out that NIM declined 12 basis points quarter-on-quarter to 3.26%, the lowest level since the merger, while return on assets (RoA) fell to 1.74%, down 11 basis points year-on-year. NII growth also remained soft at 7% YoY.

Investec said loan growth improved to 15.6% YoY from 12% in Q4 FY26, driven by business banking (22% YoY) and corporate loans (19% YoY), while retail loan growth remained muted at around 7%.

It also highlighted soft CASA growth of 9% YoY, with the CASA ratio declining to 32% from 38% immediately after the merger. Credit costs increased to 41 basis points, up 5 basis points sequentially, due to seasonal factors, although the provision coverage ratio (PCR) declined by 170 basis points QoQ to 66%.

On the leadership front, Investec noted that the management did not provide any update on CEO succession, stating that the board is continuing with the process and will announce its decision once it is finalised.