HDFC Bank Q2 Profit Up 4.7% at ₹19,510 Crore as Treasury Gains Fall

HDFC Bank’s standalone net profit rose 4.7% year on year to ₹19,510 crore in the July–September quarter of FY27, as a sharp fall in treasury income held back an otherwise steady performance from India’s largest private lender. The bank had reported ₹18,641 crore in the same quarter a year earlier.

The results, filed with the stock exchanges on Saturday, 17 October, came in ahead of analyst estimates, which had clustered between ₹18,850 crore and ₹18,930 crore. They are also the last set presented by Sashidhar Jagdishan, whose term as managing director and CEO ends on 26 October.

Treasury gains drop 67%, core earnings hold up

The headline growth figure understates what happened in the core business. Treasury trading gains collapsed to ₹780 crore from ₹2,390 crore a year ago, a fall of 67%. Stripping those gains out, the bank said its profit grew by about 12.6% from the year-ago period.

Net interest income, the gap between what the bank earns on loans and pays on deposits, rose 9.7% to ₹34,620 crore from ₹31,550 crore. That was marginally better than the ₹34,310–34,410 crore range analysts had pencilled in. Net interest margin stood at 3.16% on total assets and 3.32% on interest-earning assets.

Other income slipped 3.6% year on year to ₹13,830 crore, though it was up nearly 8% on the previous quarter. Fees and commissions, the steadier part of that pool, rose to ₹9,690 crore from ₹8,840 crore. Forex and derivatives income eased to ₹1,550 crore from ₹1,590 crore, while miscellaneous income climbed to ₹1,810 crore from ₹1,530 crore.

Operating expenses increased to ₹18,970 crore from ₹17,980 crore, leaving the cost-to-income ratio at 39.1%. Provisions and contingencies were broadly flat at ₹3,570 crore, and the credit cost ratio was 0.44%.

On a consolidated basis, which includes subsidiaries such as HDB Financial Services and the bank’s insurance and asset-management arms, net profit was about ₹20,700 crore. Profit for the first half of FY27 on that basis totalled ₹39,940 crore.

Deposits outpace loans as the bank rebuilds its balance sheet

For investors who have tracked HDFC Bank since its July 2023 merger with parent HDFC Ltd, the most watched metric has been the loan-to-deposit ratio. The September quarter offered some relief. Deposits rose 18.8% year on year and 4.9% sequentially to ₹33.27 lakh crore, faster than the 16.3% rise in gross advances to ₹32.2 lakh crore.

The mix of that deposit growth, however, carries a cost. Time deposits jumped 22.8% to ₹22.76 lakh crore, while current and savings account (CASA) balances grew a slower 10.8%. The CASA ratio has fallen to 31.6%, from roughly 34% a year ago and 38% in September 2023. Cheaper CASA money is the main reason large private banks enjoy a margin advantage, so the shift towards term deposits explains much of the pressure on NIMs.

On the lending side, growth was led by business segments rather than retail. Small and mid-market loans rose 23.5% to about ₹7.1 lakh crore and business banking advances jumped 28.1% to around ₹5.3 lakh crore. Corporate and wholesale loans grew 16.4%, while retail loans rose a more modest 11.7%. The total balance sheet expanded to ₹45.78 lakh crore from ₹40.03 lakh crore a year earlier.

Asset quality improves further

Bad loans continued to trend lower. The gross non-performing assets ratio improved to 1.11% from 1.17% in June and 1.24% a year ago. Excluding agricultural loans, it was 0.87%. The net NPA ratio eased to 0.37% from 0.42% a year earlier, and the provision coverage ratio was 67%.

Jagdishan described the bank’s asset quality as its “USP”, adding that it “continues to be extremely strong”. Capital remains comfortable, with a total capital adequacy ratio of 18.9% and a CET1 ratio of 17.1%. Return on assets was 1.78% and return on equity 13.5%.

Why the numbers matter for investors

HDFC Bank is among the most heavily weighted stocks in both the Nifty 50 and the Sensex, so its trajectory has an outsized effect on Indian equity portfolios and on foreign investor flows. The stock closed at about ₹729 on Friday, 16 October, and has lost more than 26% this year. It slid 5.1% after the June-quarter results, when margin compression worried the market.

This time the picture is mixed rather than weak. Core profitability is improving and asset quality is among the best in the sector, but margins have yet to turn and the bank is relying heavily on costlier term deposits to fund growth. Jagdishan struck an upbeat note on the first point, saying the “margin trajectory should turn upwards from the next quarter onwards”.

The comparison with ICICI Bank, which also reported on Saturday, will sharpen the debate. ICICI Bank posted a 20.1% rise in standalone profit to ₹14,843 crore on 30% loan growth, though its own margin narrowed to 4.18%. Analysts are likely to weigh HDFC Bank’s cleaner asset book against its slower earnings growth when the market opens on Monday, 19 October, the first trading session after the results.

A leadership handover in ten days

The quarter also closes a chapter at the top. Jagdishan informed the board on 29 August that he would not seek reappointment. On 1 October, the board named Anup Bagchi as MD and CEO for three years from 27 October 2026. Bagchi, who has led ICICI Prudential Life Insurance since June 2023, has spent more than three decades in the ICICI Group and was an executive director at ICICI Bank between 2017 and 2023.

Bagchi, who joined the results briefing as MD and CEO-designate, called the post-merger balance sheet and transformation “still works in progress”. Deputy managing director Kaizad Bharucha is due to leave at the end of December, so the new chief will see further change in his senior team within months.

What happens next

The immediate test is Monday’s share price response, with options pricing ahead of the results implying a move of roughly 3% in either direction. Beyond that, investors will look for three things in the December quarter: whether margins actually begin to recover as management has signalled, whether CASA balances stabilise, and what strategic priorities Bagchi sets out once he takes charge on 27 October.

For a bank that has spent more than three years digesting the largest merger in Indian corporate history, a cleaner balance sheet is now within reach. Converting that into faster earnings growth will be the new CEO’s first and most closely watched assignment.