HDFC Bank Q1 FY26: Profit Dips Despite Rs.9,128 Cr IPO Boost; Big Provisions Signal Caution
HDFC Bank Q1 FY26: HDFC Bank reported a slight decline in its consolidated net profit for the April–June quarter of FY26, landing at Rs.16,258 crore—down from Rs.16,475 crore YoY. This came despite a hefty pre-tax gain of Rs.9,128 crore from the IPO of its subsidiary, HDB Financial Services. The dip in profitability was largely due to total provisions of Rs.14,442 crore, which include Rs.9,000 crore in floating provisions and Rs.1,700 crore in contingent buffers, signaling a cautious outlook on asset quality.
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Stake in HDB Financial Services Reduced Post IPO
Following the IPO, HDFC Bank’s holding in HDB Financial Services reduced from 94.32% to 74.19% as of June 30, 2025. Despite the dilution, the IPO has significantly contributed to the bank's other income in this quarter.
Net Interest Income Grows Moderately Amid Margin Pressure
The standalone net interest income (NII) rose 5.4% YoY to Rs.31,438 crore, slightly missing market estimates. However, the core net interest margin (NIM) dropped to 3.35% from 3.46% in Q4 FY25. This compression is attributed to faster deposit repricing compared to assets, tightening the bank’s interest margins.
Operational Expenses and Cost-to-Income Ratio Remain in Check
Operating expenses increased 4.9% YoY to Rs.17,434 crore, comprising Rs.6,158 crore in employee costs and Rs.11,276 crore in other operating expenses. The cost-to-income ratio, excluding the HDB IPO gain, stood at a manageable 39.6%, showing decent operational efficiency.
Strong Growth in Income and Advances
Total standalone income increased to Rs.99,200 crore from Rs.83,701 crore in the same quarter last year. Gross advances grew 6.7% YoY to Rs.26.53 lakh crore, while total deposits rose 16.2% to Rs.27.64 lakh crore, indicating healthy growth on both lending and deposits fronts.
CASA Ratio Drops; Capital Position Improves
The bank’s CASA (Current Account Savings Account) ratio dropped to 33.9%, down from 38.2% YoY, reflecting a shift in deposit mix. However, capital adequacy improved, with CAR rising to 19.88% from 19.33% a year ago, reinforcing the bank’s strong capital position.
Other Income Surges on IPO Gains
On the consolidated front, total income rose to Rs.1.33 lakh crore from Rs.1.17 lakh crore last year. Other income surged to Rs.21,730 crore, fueled by the HDB IPO. Key contributors included Rs.75.9 crore from fees, Rs.16.3 crore from forex and derivatives, and Rs.101.1 crore from trading gains.
Steady Asset Quality Amid Higher NPAs
The gross NPA ratio stood at 1.40% while the net NPA came in at 0.47%, slightly higher than the same quarter last year. Despite the rise, the return on assets remained stable at 0.48%, showcasing resilience in overall performance.
Operating Profit Solid, Dividend and Bonus Issue Announced
Operating profit for the quarter reached Rs.35,734 crore. In a move to reward shareholders, HDFC Bank announced a special interim dividend of Rs.5 per share and a 1:1 bonus share issue. The dividend will be paid by August 11 to shareholders on record as of July 25. The bonus share record date is set for August 27, subject to approvals.
Market Expectations Fall Short; Stock Reacts
According to Moneycontrol's analyst poll, the Street had expected a 7% increase in NII and a 7.4% rise in net profit. The bank’s actual numbers came in slightly below estimates, and its stock declined by 1.56%, ending at Rs.1,959 on NSE ahead of the results.
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