Whalesbook
HDFC Bank announced its second-quarter results for FY26, showing a standalone net profit of Rs 18,641.28 crore, an increase of 11% compared to Rs 16,820.97 crore in the same period last year. The bank's net interest income (NII) rose by 4.8% year-on-year to Rs 31,550 crore. However, the net interest margin (NIM) slightly decreased to 3.27% from 3.35% in the previous quarter (Q1 FY26).
Brokerage firm Nuvama Wealth Management has maintained a 'Buy' rating on HDFC Bank shares, setting a target price of Rs 1,170. This implies a potential upside of 16-17% from the current market price. Nuvama expects NIMs to improve from Q3 FY26 onwards, driven by system-level growth, superior asset quality, and improving core earnings, which they believe will lead to stock outperformance.
The bank's loan portfolio saw a 4.5% quarter-on-quarter and 10% year-on-year growth. Retail loans grew 2% QoQ, while wholesale loans increased by 5% QoQ. Deposits grew 12% YoY and 1% QoQ. Fee income surged 17% QoQ, partly due to loan growth, though trading gains declined significantly.
Asset quality remained strong, with total slippage falling to 1.2% of loans from 1.4% in Q1 FY26. Gross non-performing loans (GNPL) dipped to 1.24% from 1.35% QoQ. Core credit costs fell sharply to 28 basis points from 56 basis points QoQ, supported by lower slippages and loan upgrades.
Impact: The positive Q2 results, coupled with a strong 'Buy' rating and attractive target price from Nuvama, are likely to support HDFC Bank's stock performance and investor sentiment. The market will monitor the bank's ability to sustain loan growth, improve NIMs, and maintain its strong asset quality in the coming quarters. Impact rating: 8/10
Definitions:
Net Interest Income (NII): The difference between the interest income generated by a bank from its lending activities and the interest it pays out to its depositors.
Net Interest Margin (NIM): A measure of a bank's profitability, calculated as the difference between interest income and interest paid, divided by the average earning assets.
Loan Portfolio: The total amount of loans a bank has issued to its customers.
Asset Quality: Refers to the risk associated with a bank's loans and investments, indicating the likelihood of default or loss.
Slippage: The amount of loans that have moved from a better asset quality category to a worse one, often indicating deteriorating creditworthiness.
Non-Performing Loans (NPL): Loans for which the borrower has stopped making scheduled payments for a specified period (typically 90 days).
Gross Non-Performing Loans (GNPL): The total value of non-performing loans before any provisions are deducted.
Provisioning: Funds set aside by a bank to cover potential losses from bad loans or other risks.