Earnings Outlook: HDFC Bank is likely to post modest earnings growth in the third quarter

Brokerage Axis Securities says HDFC Bank’s credit growth is gradually improving, while deposit growth will disappoint, leading to higher CD ratio | Photo credit:

“We expect better momentum in credit growth. The key factor to watch is deposit traction and ‘retail and others’ composition. We expect the credit-deposit (CD) ratio to rise within 98-100 per cent. Further commentary on the direction of CD ratios will have to be watched,” Elara Capital said in a report, adding that it expects HDFC Bank’s NIMs to be broadly stable. The lender’s NIM stood at 3.27 percent in Q2FY26.

According to provisional figures from HDFC Bank, the lender’s total advances and deposits rose 12 per cent year-on-year to ₹28.45 lakh crore and ₹28.59 lakh crore respectively, the same as at the end of December. The bank’s management has indicated that progress in the current fiscal will be similar to that of the banking sector, and faster than that of the sector in the next fiscal. Deposit growth will continue to outpace the industry average, they said.

higher CD ratio

Brokerage Axis Securities says HDFC Bank’s credit growth is gradually improving, while deposit growth will disappoint, leading to a higher CD ratio. Operating cost growth will also be modest, but lower government bond income could hit pre-provision operating profit (PPOP) growth. The broker expects HDFC Bank slippages to remain under control, except seasonal slippages in agriculture.

“HDFC Bank is our top pick within our banking coverage. Our estimates of key fundamentals including ROA and ROE include a significant margin of safety by taking into account an accelerated timeline for building priority sector credit assets, moderate CASA momentum and no expected operating cost savings from merger synergies,” BNP Paribas Research said in a note.

“Despite these conservative assumptions, we see ROA touching 1.8 percent in FY26 and ROE approaching the pre-merger steady state of 15 percent in FY27. A valuation of 2.2x one-year forward core BVPS (deep discount to long-term average) does little justice to a core ROE of 14 percent for FY26E, which compares favorably to the pre-merger five-year average,” the report said.

Published on January 14, 2026