HDFC Bank — Q4 FY26 earnings call

Call held 18 Apr 2026

Management summary

HDFC Bank delivered a strong Q4 and FY26, marked by accelerated credit growth of 12% and robust deposit growth of 14.4%. EPS grew 10% and RoA remained stable at 1.9%, driven by improved cost efficiencies and healthy asset quality. The bank highlighted significant investments in technology and distribution, yielding high digital adoption and strong customer acquisition. While geopolitical factors and past rate cycles influenced investment yields and treasury income, management remains focused on sustainable growth and enhancing Return on Assets.

Highlights

  • Credit growth accelerated to 12% in FY26, up from 5.5% in FY25, indicating positive momentum.

  • Deposit growth rate of 14.4% continues to grow faster than credit growth, strengthening the deposit franchise.

  • EPS growth significantly improved to 10% in FY26 from 3% in FY25, reflecting better profitability.

  • Return on Assets (RoA) remained stable at 1.9% for FY26, supported by declining cost-to-income ratio (39.5%).

  • Granular deposits (<INR 3 crores) now constitute 47% of total net accretion, up from 31% in FY25, enhancing deposit stability.

  • Strong capital position with a CAR of 19.7% and healthy asset quality with 1.15% gross NPAs.

  • High digital adoption rates (97% for payments, 92% for acquisitions) and 5 AI use cases in production demonstrate technology leadership.

Concerns

  • Geopolitical situation acknowledged as a factor that could temper corporate growth and impact the rate cycle.

  • Investment yields have been impacted by the previous rate cycle and geopolitical risks, leading to modest treasury income due to lower FX volumes and spreads.

  • Third-party distribution fee growth was modest at 3.5%, lagging overall customer growth, attributed to tepid volumes and product mix.

Key financials

  1. Credit Growth 12%
  2. Deposit Growth 14.4%
  3. Net Income Growth 11%
  4. EPS Growth 10%
  5. RoA 1.9%
  6. Cost-to-Income Ratio 39.5%
  7. CAR 19.7%
  8. GNPA 1.1%
  9. LCR 114%
  10. Cost of Funds 4.4%
  11. Corporate Loans Growth 13%
  12. Business Banking (MSME) Growth 20%

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.

Capital allocation

high confidence
  • Liquidity Liquidity disclosed LCR is 114%, within the target range of 110-120%.
    Kunal, in the past, we have mentioned that our endeavor for LCR is to be between 110% and 120%. We are somewhere in the middle. Last quarter, I think we were about 116%. Now we are 114%.

Guidance & targets

Profitability

  • RoA Profitability · next 1, 2, 3 years · Medium confidence enhance
    The above leadership position will enable us to harness efficiencies across the organization and will be a key driver to enhance return on asset over the next 1, 2, 3 years.

    — Sashidhar Jagdishan

  • EPS Growth Profitability · Medium confidence consistent
    All of it should culminate in a consistent EPS growth.

    — Sashidhar Jagdishan

  • NIM Profitability · Low confidence range bound
    range bound is what I would say, but focus more on the returns because if this becomes kind of where it continues to be within a small range bound, then we work towards getting returns to be stable to going up through other levers.

    — Srinivasan Vaidyanathan

Liquidity

  • LCR Liquidity · High confidence 110-120%
    Kunal, in the past, we have mentioned that our endeavor for LCR is to be between 110% and 120%.

    — Srinivasan Vaidyanathan

Deposits

  • Granular Deposits (<INR 3 crores) Deposits · future · Low confidence go up
    this particular number should go up even in future.

    — Sashidhar Jagdishan

Volume

  • Business Banking (MSME) Growth Volume · Medium confidence 18-21%
    we've grown at about 20% year-on-year, and that will continue to also be in that range of 18% to 20%, 21%, depending upon, obviously, some of the developments in the economy.

    — Kaizad Bharucha

What to watch in Q1 FY27

Credit Growth Momentum

Next quarter/FY27
Current 12% (FY26)
Target Continued 'good momentum and trajectory' above system average

Why it matters

Key indicator of market share gains and overall business health, especially in the context of system growth.

So I think we will continue to have a good momentum and trajectory in our growth. But you have to keep in mind what the geopolitical situation and that fallout is going to be. But we are confident that we see the positivity continuing.

Risks & concerns

  • Geopolitical Situation

    medium

    Geopolitical events could temper corporate growth and impact the rate cycle, though management expects continued momentum.

    Management acknowledged

  • Rate Cycle & NIM Volatility

    medium

    The rate reduction cycle is paused, and securities market rates have gone up, leading to NIM being 'range bound' and focus shifting to RoA.

    Management acknowledged

  • Modest Third-Party Distribution Fee Growth

    low

    Growth in third-party distribution fees was modest (3.5%) due to tepid volumes and product mix, but management sees 'enormous opportunity space' for future penetration.

    Management acknowledged

Q&A highlights

7 direct
Growth Trajectory & Drivers for FY27 Direct
So I think we will continue to have a good momentum and trajectory in our growth. But you have to keep in mind what the geopolitical situation and that fallout is going to be. But we are confident that we see the positivity continuing.

Analyst sought clarity on future growth drivers and targets, especially given the system's increased growth, and management provided segment-wise outlook and acknowledged external factors.

Asked by Mahrukh Adajania

Deposit Market Share & Q4 Surge Direct
the INR 2.45 lakh crores of deposits that came in, typically, you see that the market is pretty active and accretes maximum, almost more than half, close to half or slightly above half of what the year accretes in the last quarter. In this year, it's no exception.

Question addressed the bank's ability to gain market share in deposits and explained the drivers behind the significant Q4 deposit accretion, including market liquidity and increased customer engagement.

Asked by Nitin Aggarwal

Bank's Credit Growth vs. System Growth & Deposit Granularity Direct
The system, you have said 16% or 15%. But actually, when you compare the period-end numbers as of 31st March, which is published by the Reserve Bank of India and you make the math, it comes to somewhere around 13.5% to 13.9%. That's the system growth. Obviously, it has been faster. It is something that we have to navigate, but it's not too far away from the momentum we have seen from a 5.4% growth in FY25 to a 12% growth.

Analyst challenged the bank's growth relative to the system, prompting management to clarify system growth figures and highlight the bank's responsible growth strategy and improved granularity of deposits.

Asked by Kunal Shah

LCR Target Range Direct
Kunal, in the past, we have mentioned that our endeavor for LCR is to be between 110% and 120%. We are somewhere in the middle. Last quarter, I think we were about 116%. Now we are 114%.

Analyst sought confirmation on the bank's liquidity management targets, and management provided a clear range and current status.

Asked by Kunal Shah

NIM Trajectory & Primary Performance Metric Direct
ROA is what we should focus on. PPOP is an intermediate, right? I mean you take higher risk and take it in the top line, you give it away in the credit cost below the PPOP. But PPOP doesn't determine what returns you can get. So, we focus on the return on asset.

Analyst questioned NIM sustainability and the bank's key performance metric, leading management to emphasize RoA as the primary focus, acknowledging external impacts on NIM.

Asked by Pranav

Cost-to-Income Ratio & Operating Leverage Direct
Which is what I mentioned, Seshadri, that if we just focus on the investments that we have made in technology and implement them across the organization, you should see operating leverage kicking in and enhancing your RoAS.

Analyst inquired about the peaking of cost-to-income and potential for opex slowdown, and management linked technology investments to future operating leverage and RoAS enhancement.

Asked by Seshadri Sen

Retail Loan Growth Levers & FY27 Outlook Direct
So I think I did cover it in my opening response to Mahrukh. We have seen good traction across our products in wheels, personal loans as well as in the mortgages space over the last 3 quarters sequentially. And in terms of levers today, if I just take mortgages, we were doing mortgages earlier out of about 6,800 locations. We are now covering mortgages from more than 7,800 locations, closer to 8,000.

Analyst sought details on how the bank plans to accelerate retail loan growth, and management provided specific examples of expanded distribution and product traction.

Asked by Seshadri Sen

Investment Yields & Treasury/FX Impact Partial
There is some negative impact. If you see that the rate of growth on the treasury income is modest. And the reason for that being modest is that, I'm talking about the FX component of the treasury. It's modest because there is a volume impact. So due to various risks on the foreign exchange trade, there have been lower volumes and lower spreads too.

Analyst questioned the decline in investment yields and the impact on treasury, prompting management to explain the specific factors affecting FX-related income.

Asked by Rikin Shah

2 min read 7 chapters

Detailed narrative

Strong FY26 Performance & Growth Momentum

HDFC Bank reported a robust FY26, with credit growth accelerating to 12% from 5.5% in FY25, and deposit growth at 14.4%, outpacing credit. Net income grew 11% and EPS increased by 10% compared to 3% last year. The bank maintained a stable Return on Assets (RoA) at 1.9% and improved its cost-to-income ratio to 39.5% from 40.5% in the previous year, driven by cost efficiencies.

Robust Capital & Asset Quality

The bank maintains a strong capital position with a Capital Adequacy Ratio (CAR) of 19.7% and healthy asset quality, reflected in a gross NPA of 1.15%. A significant provisioning buffer of almost 125 basis points has been created to absorb future shocks. Management emphasized that the Loan-to-Deposit Ratio (LDR) is no longer a constraint, and the bank continues to gain deposit market share.

Deposit Franchise Strength & Liquidity

HDFC Bank's deposit franchise demonstrated significant strength, with incremental deposits less than INR 3 crores growing by approximately 74% over FY25, now constituting 47% of total net accretion compared to 31% previously. The bank's Liquidity Coverage Ratio (LCR) stands at 114%, within its target range of 110-120%, indicating comfortable liquidity management. The cost of funds marginally decreased to 4.4%, down 50 basis points year-on-year.

Technology & AI Leadership

The bank has made substantial investments, quadrupling tech spend to over $1 billion, and now boasts a mobile app serving over 60 million registered customers. Digital adoption is high at 97% for payments and 92% for acquisitions. HDFC Bank has developed a unified AI platform with 5 use cases in production and 14 in development, aiming to enhance efficiencies and drive future RoA.

Retail & Corporate Growth Drivers

Retail growth has shown good traction across wheels, personal loans, and mortgages, with the bank expanding its mortgage coverage to over 7,800 locations from 6,800 previously. Corporate loans grew 13%, supported by demand in sectors like electronics, renewables, and auto ancillaries. The MSME segment, where HDFC Bank is a market leader, grew its business banking by 20% year-on-year, with expectations of continued growth in the 18-21% range.

Merger Synergies & Cross-Sell

The merger with HDFC Limited continues to yield significant synergies, with liability penetration for home loan customers increasing from 36% to 49-50% of the stock. CASA balances from the merged entity grew from INR 50,000 crores to INR 86,000 crores. The bank is actively cross-selling products like credit cards (23% of home loan customers have active cards), insurance, and wealth accounts to these customers.

NIM & Investment Yield Dynamics

Net Interest Margin (NIM) trajectory is influenced by the rate cycle and geopolitical situation, which has paused the rate reduction cycle and led to some upward movement in securities market rates. Investment yields have been impacted by the previous rate cycle and FX component, resulting in modest treasury income due to lower volumes and spreads. Management emphasized focusing on Return on Assets (RoA) rather than solely NIM, aiming for stable returns through efficiency levers.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Financial Services earnings calls