The country’s largest lender HDFC Bank is likely to report a slight contraction in net interest margin (NIM) but robust business growth and asset quality in Q2FY26, say analysts. The lender will publish its second-quarter results on Saturday.
“HDFC Bank is rebalancing towards retail assets and deposits to replace expensive loans (from erstwhile HDFC), improving margins. Despite near-term NIM compression due to policy cuts, we estimate margin recovery towards 3.5 per cent in FY27, driven by easing of funding costs and better mix,” Motilal Oswal said in a statement report.
“The bank maintains best-in-class asset quality, with GNPA/NNPA (gross and net non-performing assets) ratios of 1.4%/0.5% and strong provisioning buffers (1.4 percent of loans, the highest among peers). Robust underwriting across all segments and prudent deployment of gains from share sales should drive down credit costs the medium term at 50 basis points (bps),” the bank said.
According to Systematix, preliminary advance growth at HDFC Bank stood at 4 percent and the fall in return on assets will not be fully offset by the fall in deposit costs, leading to a contraction in margins.
“Fee income growth will sequentially match progress growth. Due to a one-time gain in Q1FY26, other income will subsequently decline sharply,” the report said.
Brokerage Emaky Global said the bank will report better growth and lower margin contraction compared to first quarter levels. Slippages could come down due to lower NPAs in the Kisan Credit Card segment, which will help profits.
The bank management’s commentary on deposit growth, resulting credit growth and margin trajectory will be monitored, Axis Securities said.
Published on October 17, 2025
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