MUMBAI, October 18, 2025 — HDFC Bank Ltd (HDBK.NS), India’s largest private lender by market capitalization, reported a better-than-expected profit for the September quarter, buoyed by strong loan growth and higher trading income, even as net interest margins (NIMs) continued to weaken.
The bank posted a standalone net profit of ₹186.4 billion ($2.12 billion) for the quarter ended September, up from ₹168.21 billion a year earlier. The results exceeded analysts’ expectations of ₹177.18 billion, according to LSEG data.
Margins Under Pressure Despite Revenue Growth
While net interest income (NII) — the difference between interest earned and interest paid — rose 4.8% year-on-year to ₹315.5 billion, the lender’s NIM fell to 3.27% from 3.35% in the previous quarter.
The margin compression follows the Reserve Bank of India’s series of rate cuts, which banks typically pass on to borrowers faster than they adjust deposit rates, temporarily squeezing profitability.
Trading Income Provides a Boost
A surge in trading and mark-to-market gains helped bolster earnings. The bank reported ₹23.9 billion in gains from these activities, compared with just ₹2.9 billion in the same period last year — reflecting favorable bond market movements and active treasury management.
Loan and Deposit Growth Stay Solid
HDFC Bank’s loan book expanded 9.9% over the year, driven by strong demand from small and mid-sized enterprises (SMEs). Deposits rose 12% year-on-year, underscoring the bank’s ongoing efforts to rebuild its funding base following its 2023 merger with parent HDFC Ltd.
Analysts note that India’s credit environment has strengthened in recent months, with retail and SME loan demand showing recovery amid recent tax cuts and economic stabilization.
Asset Quality Improves; Provisions Rise
The bank’s gross non-performing asset (NPA) ratio improved to 1.24% as of September, compared with 1.4% in the previous quarter — a positive sign for investors wary of rising delinquencies in the retail segment.
However, provisions for potential bad loans increased 29.6% year-on-year to ₹35 billion, as HDFC Bank opted to build floating provisions to buffer against potential future stress.
Indian banks have been tightening underwriting standards and increasing coverage for personal loans and credit card segments, where delinquencies have inched higher amid a slowing economy.
Analyst Outlook: Stable Growth, Modest Profit Pressure
Market analysts said the results highlight resilient growth fundamentals for HDFC Bank despite the interest-rate environment. “Loan demand remains robust, and the improvement in asset quality offsets the temporary margin squeeze,” one Mumbai-based banking analyst said.
The bank is expected to focus on balance sheet diversification and digital lending efficiencies to sustain profitability in the coming quarters.
Key Metrics at a Glance (Q2 FY2025-26)
| Metric | Q2 FY25-26 | Q2 FY24-25 | Change |
|---|---|---|---|
| Net Profit | ₹186.4 billion | ₹168.2 billion | +10.8% |
| Net Interest Income | ₹315.5 billion | ₹301.0 billion* | +4.8% |
| Net Interest Margin | 3.27% | 3.35% (Q1 FY25-26) | ↓ |
| Gross NPA Ratio | 1.24% | 1.4% | Improved |
| Deposits Growth | 12% YoY | — | — |
| Loan Growth | 9.9% YoY | — | — |
| Provisions | ₹35 billion | ₹27 billion | +29.6% |
(*approximate prior-year base)
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