HDFC Bank will announce its Q1 earnings on Saturday, July 19, where the largest Indian private sector lender is expected to post a moderate set of numbers with steady profit growth but visible pressure on net interest margins (NIMs) and muted sequential loan growth. Analysts suggest investors should closely watch the bank’s commentary on deposit accretion and margin trajectory going forward.
The estimates of five brokerages viz. Axis Securities, Prabhudas Lilladher, Nuvama Institutional Equities, Nomura and ICICI Securities have been taken into consideration.
Here’s what brokerages said:
1) PAT
Brokerages have estimated HDFC Bank’s net profit in Q1FY26 to range between Rs 16,400 and Rs 17,120 crore, translating into a 1.5–6% YoY growth, but a 2.8–5% QoQ decline. The decline is attributed to softer NII growth, margin compression, and elevated provisions.
Axis Securities: Rs 17,120 crore, likely up by 5.8% YoY and down by 2.8% QoQ
- Prabhudas Lilladher pegs PAT at Rs 16,422 crore, likely uptick of 1.5% YoY and down 2.9% QoQ
- Nuvama: Rs 17,110 crore, up 5.8% YoY and down 2.9% QoQ
- Nomura: Rs 16,870 crore, up 4% YoY and down 4% QoQ
- ICICI Securities: Rs 16,742 crore, up 3.5% YoY and down 5% QoQ
2) NII/NIMs
Net Interest Income (NII) is expected to grow by 4.6–6.2% YoY in the range of Rs 31,180 – Rs 31,686 crore. The highest estimates have been given by Axis Securities while the lowest by Nomura.
Barring Prabhudas, all other brokerages see a QoQ decline in HDFC Bank’s NII. Nomura has estimated the highest decline at 3%. Meanwhile Prabhudas sees a 0.2% uptick.
NIMs range is 3.3% – 3.55% and are seen contracting by 12–18 bps QoQ according to Nomura and ICICI Securities.
3) Pre-Provision Operating Profit (PPOP)
PPOP is likely to grow between 4–9% YoY. However, on a QoQ basis, a 2–3.6% decline is expected.
Axis Securities: Rs 26,013 crore (+8.9% YoY, -2% QoQ)
Nuvama: Rs 25,870 crore (+8.3% YoY, -2.5% QoQ)
Prabhudas Lilladher: Rs 24,897 crore (+4.2% YoY, -3.6% QoQ)
Nomura: Rs 25,940 crore (+9% YoY, -2% QoQ)
4) Loans & deposits
Loan book expansion remains sluggish with growth of 6.7–7% YoY and flat to 0.5% QoQ. In contrast, deposits grew by 16% YoY, suggesting an improvement in the loan-to-deposit ratio (LDR).
The estimates for lender’s loans as on June ended quarter are around Rs 26.3 lakh crore. Meanwhile, the deposits are estimated at Rs 27.6 lakh crore.
Axis Securities flagged that deposit growth outpaced credit growth, aiding LDR.
5) Provisions & slippages
Provisions are expected to rise significantly YoY by up to 28% and are seen in the range of Rs 3,200 – Rs 3,327 crore.
Meanwhile, slippages are seen at Rs 8,300 crore, up 5.1% YoY and 10.7% QoQ according to Nuvama and ICICI Securities.
Despite higher slippages, asset quality is expected to remain steady with manageable stress.
6) Credit cost
Brokerages peg the credit cost at 0.50%. While Nomura expects a 10 bps YoY, and 3 bps QoQ increase Prabhudas pegs an 8 bps YoY and 1 bps QoQ uptick.
7) Key monitorables
Investors should keep an eye on deposit accretion and credit growth. With rising deposit costs and soft credit demand, the outlook on margins will be pivotal for earnings recovery.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)