HDFC Bank — Q1 FY27 earnings call

Call held 18 Jul 2026

Management summary

HDFC Bank reported an adjusted PAT growth of 9.8% for Q1 FY27, with balance sheet growth at 13.5% YoY. The bank saw strong advances across corporate, MSME, and retail segments, but the CASA ratio declined to 34%. Management is focused on improving CASA through quality acquisitions and unit economics, and expects FCNR mobilization to gain significant traction in the coming months. The bank also highlighted its digital transformation efforts and resilience against external risks.

Highlights

  • Adjusted PAT growth for Q1 FY27 was 9.8% YoY, indicating underlying strength despite one-time items.

  • Balance sheet growth remained robust at 13.5% YoY, demonstrating continued expansion.

  • Strong advances growth across key segments: corporate and wholesale at 18%, MSME at 22.3%, unsecured business at 20%, and mortgages at 14%.

  • Productivity per branch significantly improved to INR 330 crores currently, up from INR 266 crores in FY23.

  • Significant progress on FCNR (B) mobilization with milestones expected in July, August, September.

Concerns

  • CASA ratio declined to 34%, below pre-merger levels of 38-40%, though management is focused on improving it.

  • Margins have not yet bottomed out, with potential for 40-50 basis points change in cost of funds, not expected to change in a hurry.

  • Retail loan growth has been range-bound at 7-8%, though management expects a pickup in coming quarters.

Key financials

  1. Adjusted PAT Growth 9.8% +9.8%YoY
  2. Balance Sheet Growth 13.5% +13.5%YoY
  3. CASA Ratio 34%
  4. Borrowing Mix 11%
  5. Retail Mix 52%
  6. Overall Provision Coverage Ratio 66%

What they filed

Q1 FY27: revenue up 3.7%, net profit up 19.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue83,002 85,040 86,779 87,372 86,994 +5%87,067 +2%87,182 +0%90,575 +4%
Net profit18,627 18,340 19,285 17,090 20,364 +9%20,691 +13%21,074 +9%20,383 +19%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Corporate and Wholesale Segment
    18% Growth
  • MSME Segment
    22.3% Growth
  • Unsecured Business (Disbursements)
    20% Growth
  • Mortgages (Disbursements)
    14% Growth

Guidance & targets

CASA Ratio

  • CASA Ratio CASA Ratio · next nine months · Medium confidence around 38%
    Okay, let me let me try and attempt that, Sesh. For a start, the endeavor and our vision is to reach to somewhere near the pre-merger levels or just around the time of the merger, which was around 38.

    — Sashidhar Jagdishan

Profitability

  • Profit Growth vs Balance Sheet Growth Profitability · longer term · Medium confidence at or above the balance sheet growth
    We do think that in the longer term that the profit growth should be at or above the balance sheet growth. Yes, that's still in our plans and that's how we approach.

    — Srinivasan Vaidyanathan

Provision Coverage Ratio

  • PCR for unsecured mix Provision Coverage Ratio · ongoing · Medium confidence in the 70s, mid-70s or higher
    If you look at the unsecured mix, the provision coverage will be in the 70s, mid-70s or higher.

    — Srinivasan Vaidyanathan

Acquisition Numbers

  • Acquisition numbers and value Acquisition Numbers · next nine months · Medium confidence fair amount of change
    I think that is what the entire franchise is driving about and maybe over the next nine months we hope to see a fair amount of change in the acquisition numbers and hence value.

    — Sashidhar Jagdishan

What to watch in Q2 FY27

CASA Ratio Improvement

next nine months
Current 34%
Target around 38% (pre-merger levels)

Why it matters

CASA is a key driver of cost of funds and NIM for banks; improvement indicates stronger deposit franchise.

Okay, let me let me try and attempt that, Sesh. For a start, the endeavor and our vision is to reach to somewhere near the pre-merger levels or just around the time of the merger, which was around 38.

Risks & concerns

  • Weather-related disruptions (El Nino)

    medium

    El Nino could impact the third quarter of the financial year, particularly agriculture.

    Management acknowledged

  • Geopolitical situation in West Asia

    medium

    The country has weathered these reasonably well, but it remains a watch item.

    Management acknowledged

  • Fraudulent accounts and mules

    low

    Banking system experienced an increase in fraudsters using accounts as mules, leading to a focus on quality acquisitions.

    Management acknowledged

Q&A highlights

4 direct, 2 evasive
Margins bottoming out and headwinds/tailwinds Partial
Okay, first probably I'll take the first part of the question, how to think about the margin. There are two aspects as you know, one, the cost of funds is the biggest opportunity on the margin where compared to our historical norms as well as compared to what we have seen in the industry as such, there can be 40, 50 basis points change, but it is not going to change in a hurry.

Analyst sought clarity on margin trajectory, and management indicated potential for further cost of funds changes but no immediate bottoming out.

Asked by Mahrukh Adajania

Appointment of one more Executive Director (ED) Evasive
Yes, there are several milestones which the Board is seized of, including, with the appointment of the new Chairman, from a new part-time Chairman. Some of which all of you know. I think a fair amount of action will be visible in a short time period and I would like you to sort of wait for the same.

Analyst asked for an update on a key leadership appointment, but management deferred providing specific details or timelines.

Asked by Mahrukh Adajania

Branch scaling and SA market share Direct
If you look at the per branch metrics, we are about INR 330 crores per branch currently. And if you go back to the FY'23 time period, we were INR 266 crores per branch... So, the branches are behaving according to the model that is envisaged.

Analyst questioned the effectiveness of branch expansion on SA market share, and management provided data on improved branch productivity and a shift to 'quality acquisitions' and 'unit economics'.

Asked by Pranav Gundlapalle

CEO reappointment process Evasive
As regards the third question that you had on the reappointment of the MD, I can, share with you that the GNRC and Board is fully seized of the matter and that is work in progress and as they arrive at a conclusion, we will certainly make the necessary announcements in that regard.

Analyst inquired about the status of the CEO's reappointment, a critical governance matter, but management provided a non-committal response.

Asked by Kunal Shah

PAT growth lagging balance sheet growth Direct
The reported profits when you compare last year this year, it does show 5%. But last year included certain one-timers like HDB gains and then we had a floating provision counter-cyclical buffer that we added and some contingent provision and so on. So adjusted for that, I think in one of our reports that we filed, it shows 9.8% profit growth, yes.

Analyst challenged the reported PAT growth, leading management to clarify the adjusted growth figure and commit to profit growth exceeding balance sheet growth in the longer term.

Asked by Suresh Ganapathy

Decline in CASA ratio and path to recovery Direct
Okay, let me let me try and attempt that, Sesh. For a start, the endeavor and our vision is to reach to somewhere near the pre-merger levels or just around the time of the merger, which was around 38.

Analyst questioned the significant drop in CASA ratio to 34%, and management outlined a strategy focused on unit economics and quality acquisitions to return to pre-merger levels of 38-40%.

Asked by Suresh Ganapathy

Impact of ECL on credit cost Direct
I don't think there will be anything material, but there will be some because as exactly I described, standard assets today are approximately 40, there are some 25 basis points, some 100 basis points, but on an average 40 basis points standard assets. And that by definition because of the floor which are there, unsecured floor is 1% in stage 1, which is standard, stage 2 in any delinquency bucket the floor is 5% and so on. So because of the floor there will be enhancement, but then the way we look today and look forward from here, it would be some impact but nothing material in terms of the impact.

Analyst sought to understand the financial impact of the new ECL method, and management clarified that while there would be 'some impact', it would not be 'material' due to existing provisions and floor mechanisms.

Asked by Abhishek Murarka

Request for weekday earnings reporting Partial
There is a reason why most of us are all doing on Saturdays. It's not that we have a joy in coming to work on a Saturday, I can assure you that, or to spoil your weekend. There is a reason why because since the markets are closed and a fair amount of people will get exposed to this kind of information through the day, we just want to minimize some of the regulatory transgressions that may happen, if we do it on a weekday.

Analyst requested a shift to weekday reporting for investor convenience, but management cited regulatory risk mitigation as the reason for Saturday reporting.

Asked by Piran Engineer

2 min read 7 chapters

Detailed narrative

Overall Performance and Strategic Focus

HDFC Bank navigated challenges in Q1 FY27, with an adjusted PAT growth of 9.8% YoY, despite a reported 5% growth due to one-time items in the prior year. The balance sheet grew robustly at 13.5% YoY. Management emphasized a steadfast focus on customer needs and building the franchise, expressing pride in the team's resilience. The bank welcomed a new Chairman, Rajiv Kumar, signaling stability and a clear path forward.

Deposit Growth and CASA Strategy

Deposit growth in Q1 FY27 was relatively better than historical Q1 trends, with the bank gaining market share. The current CASA ratio stands at 34%, a decline from pre-merger levels of 38-40%. Management's strategy involves increasing 'unit economics' through quality customer acquisitions, rather than solely relying on household deposit growth. They aim to return to pre-merger CASA levels within the next nine months.

Advances Growth Across Segments

The bank is poised to accelerate advances growth, having seen strong performance in recent quarters. Corporate and wholesale segments grew by 18%, while the MSME segment saw a 22.3% increase. Unsecured business disbursements (personal and business loans) grew approximately 20%, and mortgages disbursements increased by 14%. The bank is focusing on specific customer segments to unlock longer-term opportunities.

Margins and Cost of Funds Outlook

Competition remains intense, particularly in the corporate sector with thin spreads. While deposit rates on the granular side have been stable, non-granular rates remain elevated. The cost of funds could see a 40-50 basis points change over the year, but this is not expected to happen quickly. Management believes that cost of funds benefits are yet to fully materialize and will play out over time, supported by a shift towards a higher retail mix (currently 52%).

Asset Quality and Provisioning

The bank's overall provision coverage ratio (PCR) is 66%, and 70% excluding agriculture. Management stated that the current reserving methodology is adequate for the upcoming SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, which will kick in on April 1, 2027. While there might be 'some impact' on credit costs due to floor provisions for unsecured assets, it is not expected to be 'material'.

Digital Transformation and Customer Service Initiatives

HDFC Bank is prioritizing customer service, focusing on reducing turnaround times for product and service offerings. The bank is leveraging GenAI technologies for process re-engineering and enhancing its defense mechanisms against security threats. These digital initiatives are expected to drive efficiencies and improve customer engagement, contributing to growth and better cost-to-earnings ratios over the next two to three years.

FCNR Mobilization and Funding Strategy

The FCNR policy window presents a significant opportunity for the banking system. HDFC Bank has dedicated a large part of June to completing the necessary documentation and approvals for FCNR mobilization. Management expects to achieve a 'reasonably strong and significant market share' in FCNR deposits, with milestones anticipated in July, August, and September 2026.

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