India’s largest private sector lender, HDFC Bank, announced its financial results for the second quarter (HDFC Bank Q2) of FY25, with the bank reporting a 5.3% year-on-year (YoY) increase in its standalone profit after tax (PAT), reaching Rs 16,821 crore. This PAT figure surpassed market expectations and solidified HDFC Bank’s position as a leader in the banking industry.
HDFC Bank Q2 Earnings Update: Key Highlights
Strong Growth in Net Interest Income (NII)
HDFC Bank’s net interest income (NII) for the September 2024 quarter rose by 10% YoY to Rs 30,113 crore. This growth in NII was in line with estimates made by analysts, such as those from the ET Now poll. The strong NII performance was driven by solid loan growth and stable margins, underscoring the bank’s ability to navigate challenging economic conditions while maintaining profitability.
Net Interest Margin (NIM) Stability
The core net interest margin (NIM) stood at 3.46% of total assets and 3.65% of interest-earning assets. While these figures show slight changes, they demonstrate the bank’s consistent ability to manage interest rate spreads and generate solid returns from its assets, reflecting prudent management and risk controls.
Deposit and Advances Growth
HDFC Bank recorded a significant growth in total deposits, which grew 15.1% YoY, reaching Rs 25,00,100 crore by the end of the September quarter. The gross advances grew by 7% YoY to Rs 25,19,000 crore, signaling the bank’s robust lending activity across various sectors.
Retail and Rural Loans Drive Loan Book Growth
Retail loans saw a growth of 11.3%, while commercial and rural banking loans increased by 17.4%, reflecting the bank’s strong focus on expanding its retail and rural footprint. However, corporate and other wholesale loans were down by 12%, indicating a shift in the bank’s strategy to reduce exposure in these segments.
CASA Deposit Performance
Current and Savings Account (CASA) deposits, an important metric for banks, grew by 8.1%, with savings account deposits reaching Rs 6,08,100 crore and current account deposits at Rs 2,75,400 crore. Time deposits surged by 19.3% YoY, leading to CASA deposits comprising 35.3% of total deposits at the end of the quarter. This balance between CASA and time deposits demonstrates the bank’s ability to attract stable, low-cost funds.
Financial Performance Metrics: A Detailed Analysis
Non-Performing Assets (NPA)
HDFC Bank’s gross non-performing assets (NPA) slightly increased to 1.36% of gross advances in Q2 FY25, compared to 1.33% in Q1 FY25 and 1.34% in Q2 FY24. This small uptick reflects the current economic challenges faced by the banking sector, but the bank has managed to keep NPAs relatively stable.
Net NPAs, however, were well-controlled at 0.41% of net advances by the end of the September quarter, indicating the bank’s continued focus on maintaining high asset quality and efficiently managing bad loans.
Other Income Growth
The bank’s other income (non-interest revenue) rose to Rs 11,480 crore for the quarter, compared to Rs 10,710 crore in the corresponding quarter of 2023. This diversified income stream reflects the bank’s strong growth in fees, commissions, and treasury operations, further boosting overall profitability.
Operating Expenses and Cost-to-Income Ratio
Operating expenses rose by 9.7% YoY to Rs 16,890 crore. Despite this increase, HDFC Bank maintained a healthy cost-to-income ratio of 40.6%, which underscores its efficient cost management practices while expanding its operations and services.
Provisions and Contingencies
The bank’s provisions and contingencies stood at Rs 2,700 crore in Q2 FY25, lower than the Rs 2,900 crore it set aside in Q2 FY24. The total credit cost ratio for the quarter decreased to 0.43%, compared to 0.49% in the same quarter last year, reflecting the bank’s improved risk management and reduced exposure to bad loans.
Balance Sheet Growth and Capital Adequacy
HDFC Bank’s balance sheet continued to expand, with the total balance sheet size growing to Rs 36,88,100 crore, up from Rs 34,16,300 crore in the previous year.
The bank’s capital adequacy ratio (CAR) as per Basel III guidelines improved to 19.8%, compared to 19.5% in the same quarter last year, well above the regulatory requirement of 11.7%. The Tier 1 capital ratio stood at 17.8%, and the Common Equity Tier 1 capital ratio was at 17.3%, showcasing the bank’s strong capital position.
Market Reaction and HDFC Bank Share Price Movement
On the day preceding the results, HDFC Bank’s share price closed 0.47% higher at Rs 1,681.15 on the Bombay Stock Exchange (BSE). The positive performance reflected investor confidence in the bank’s quarterly results and future growth prospects.
HDFC Bank’s Q2 FY25 results underscore its ability to deliver strong financial performance amidst an evolving macroeconomic landscape. With solid growth in NII, advances, and deposits, alongside stable asset quality and well-controlled operating costs, the bank continues to set benchmarks in the private banking sector. As the bank moves forward, its focus on retail and rural lending, coupled with prudent risk management, positions it well for sustained growth in the coming quarters.
Key Numbers at a Glance:
- PAT: Rs 16,821 crore (up 5.3% YoY)
- NII: Rs 30,113 crore (up 10% YoY)
- Gross NPA: 1.36%
- Net NPA: 0.41%
- CASA deposits: Rs 8,83,500 crore (up 8.1% YoY)
- Capital adequacy ratio: 19.8%
The results reaffirm HDFC Bank’s strength in the Indian banking landscape, continuing its trajectory of growth and profitability.
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