HDFC Bank reported a net profit of Rs 19,510 crore for the second quarter of FY27, meeting analyst expectations. The lender saw steady growth in loans and deposits, while asset quality improved. Investors are tracking the bank's changing funding mix, as time deposits are growing faster than low-cost savings accounts.
HDFC Bank announced a net profit of Rs 19,510 crore for the second quarter of the 2026-27 financial year, a 4.7% rise compared to the same period last year. This performance, which aligned with market expectations, was driven by steady growth in its core lending business. The bank's net interest income, which is the difference between interest earned from loans and interest paid on deposits, rose by 9.7% to reach Rs 34,619 crore.
Asset Quality and Loan Growth
The bank showed a positive trend in its asset quality. The gross non-performing asset ratio, a measure of bad loans relative to total loans, improved to 1.11% by the end of September. This is a slight improvement from the 1.17% reported in the previous quarter. The bank also maintained its credit cost ratio at 0.44%, indicating that it continues to manage its risk levels in a controlled manner. Gross advances, or total money lent out by the bank, grew by 16.3% to Rs 32,19,500 crore. This growth was widespread, with small and mid-market enterprise loans leading the way with a 23.5% increase.
Deposit Dynamics and Margin Pressure
A critical area for investors to track is the bank’s funding mix. Total deposits grew by 18.8% to reach Rs 33,27,400 crore. However, there is a clear shift in how these deposits are composed. While current and savings account (CASA) deposits, which are cheaper for the bank, grew by 10.8%, time deposits increased by 22.8%.
This shift is significant because time deposits, such as fixed deposits, carry a higher interest cost for the bank compared to savings accounts. This trend is not unique to HDFC Bank and reflects a broader pressure across the Indian banking sector, where banks are having to pay more to attract deposits to match the demand for credit. The bank reported net interest margins of 3.16% for the quarter. Investors will likely watch whether the bank can maintain or improve these margins if the competitive pressure to offer higher interest rates on deposits continues.
Capital Adequacy and Future Outlook
The bank continues to hold a strong capital position. Its capital adequacy ratio, which measures the bank’s ability to handle losses, stood at 18.9%. This is well above the 11.9% requirement set by the Basel III global banking standards. With a cost-to-income ratio of 39.1%, the bank is balancing its operating expenses effectively. Looking ahead, the main monitorables for investors will be the bank's ability to balance its deposit growth against the cost of funding, as well as the sustainability of its credit growth in a changing economic environment.