HDFC Bank Q2 Net Profit Jumps 10% on Non-Core Income Growth

A growth in non-core income helped HDFC Bank post a 10 per cent rise in the consolidated net profit for July-September quarter of FY26 at Rs 19,610.67 crore.

On a standalone basis, the largest private sector lender's net rose 10.82 per cent to Rs 18,641.28 crore for the quarter under review.

Its core net interest income rose 4.8 per cent to Rs 31,550 crore, helped by a nearly 10 per cent growth in advances, but restricted by a compression in net interest margin to 3.27 per cent, compared to 3.5 per cent in the year-ago period.

About NIMs, a subject of great interest for investors, the bank management said that the number will be stable or may go up over the next one or two years.

Non-interest income grew 25 per cent to Rs 21,730 crore during the quarter, helping it deliver the profit growth to a large extent along with the operating expenses, which went up by 6.4 per cent to Rs 17,980 crore.

The bank's managing director and chief executive Sashidhar Jagdishan said the lender is on track on its broad strategy envisaged last year, which includes reducing the credit-deposit ratio to 96 per cent and also upping the loan growth.

He said that from FY27 onward, the bank, which merged its home finance major parent HDFC with itself, will get back to a place where the loan growth will exceed that of the banking system and help it gain market share.

There has been a visible improvement in the economic activity on the ground with recent policy measures including the rationalisation of GST and change in income tax structures by the government and the RBI's rate cuts, he said, adding that this opens up opportunities for HDFC Bank to grow its book.

Retail loans grew 7.4 per cent, small and mid-market enterprises were up by 17 per cent while the corporate and wholesale loans were up by 6.4 per cent.

The bank's chief financial officer Srinivasan Vaidyanathan told reporters that a bulk of the wholesale lending is about fulfilling working capital requirements, and the private capex is "very modest" right now.

The CEO said that the move to allow domestic banks to do acquisition finance is a positive win-win for both the lenders and the borrowers, pointing out that the cost of transactions will go down for the corporates.

It has the capability to undertake acquisition finance, and will now be looking for the final guidelines on the same.

From an asset quality perspective, the bank had gross slippages of Rs 7,400 crore, which included Rs 1,100 crore of agri advances. Gross non-performing assets ratio improved to 1.24 per cent as of September from 1.40 per cent three months ago and 1.36 per cent in the year-ago period.

Overall provisions increased to Rs 3,500 crore from Rs 2,700 crore in the year-ago period, but was much lower than the Rs 14,441 crore in the quarter-ago period.

The CFO said it has lots of questions on the expected credit loss-based system of provisioning, but added that the bank is comfortable and ready to implement new norms at an overall level.

Meanwhile, the CEO said that the bank does not expect any impact of generative artificial intelligence on jobs, and added that people will get moved to the front end from the back end because of new technologies.

The bank is conducting a few lighthouse experiments on the technology front, including using generative AI, and will be speaking about it in the future, Jagdishan said.