HDFC Bank: Stable margins and fee income lift HDFC Bank’s September quarter results: Dnyanada Vaidya

In a solid second-quarter performance, HDFC Bank delivered results that outpaced market expectations, driven by controlled expenses, stable margins, and steady improvement in asset quality.

Speaking to ET Now, Dnyanada Vaidya from Axis Securities said, “Results look good on an operational front also. Bottom line is definitely ahead of our estimates. NII is largely in line and the NIM compression is largely controlled.”

When asked about the key contributors to the stronger bottom line, Vaidya pointed to the subsidiary stake sale impact and robust fee income. “There was a subsidiary HDB stake sale impact in Q1 because of which the overall other income was a little inflated, barring that it was about a Rs 9,000 crore impact and that was utilized to make floating provisions of a similar amount in the previous quarter. Barring that, this quarter the fee income growth has been pretty strong, though there has been a dent because of the treasury income. The overall opex growth is largely contained which has resulted in a healthy PPoP growth for the bank on a YoY basis,” she explained.

Vaidya highlighted that despite the one-off impact in Q1, the bank managed a strong growth in non-interest income. “It is largely driven by a healthy about 9 odd percent growth in the core fee income, that is a positive as we see it. Also, the treasury income is much better than what was expected, so that is bumping up the non-interest income for the bank,” she added.

On the asset quality front, HDFC Bank continued to demonstrate resilience. Gross NPA declined to ₹34,289 crore from ₹37,041 crore in the previous quarter, while Net NPA dropped to ₹11,447 crore from ₹12,276 crore.

“Asset quality for HDFC has never really been a problem. Across cycles if we have seen the bank has been able to maintain very pristine asset quality. Yes, of course, there has been a little rise in GNPA in the first quarter but that is more of a seasonal phenomena where agri slippages tend to be higher in the first and the third quarter. However, this is largely in line with what we expected from the bank in terms of asset quality improvement,” Vaidya noted. Overall, the quarter’s performance reaffirmed HDFC Bank’s ability to balance growth with prudence, maintaining profitability even as sector peers grapple with cost pressures and margin compression.