Going into FY27, there are the following drivers of loan growth, though the rate of growth remains to be seen as the management is watchful of the geopolitical hindrances to trade. | Photo Credit: Dado Ruvic

HDFC Bank had come up with the results for Q4 FY26 last Saturday and they were mostly on expected lines, eliciting a muted response from markets on Monday . The bank’s standalone net profit grew 9.1 per cent during the quarter, delivering an RoA (return on assets) of 1.9 per cent. For the full year FY26, profit grew 10.9 per cent, while loans and deposits rose 12 per cent and 14.4 per cent respectively; RoA remained at 1.9 per cent just as in FY25. Consolidated net profit grew 7.4 per cent over FY25.

CD ratio target hit

Ever since the merger with erstwhile HDFC Ltd, the bank has been hard at work, managing the high credit-deposit (CD) ratio which shot to 108 per cent by Q2 FY24 - the quarter following the merger. In Q3 FY26 earnings call, when the ratio was at 99 per cent, management had guided for the ratio to fall to 95 per cent by Q4. Thanks to credit growth being lower than system (HDFC’s 12 per cent vs system’s 13.5-14 per cent), the bank has managed to hit a CD ratio of 95 per cent. The management views the 14-per cent system credit growth as excessive for a 9-per cent FY26 nominal GDP growth and had to restrict loan growth to avoid potential ‘landmines’ (possible delinquencies). The bank continued to gain market share in deposits (second to SBI at about 12 per cent) with the system growth lower at about 13.5 per cent.

FY27 Outlook

Going into FY27, loan growth drivers do exist but growth rate remains contingent on evolving geopolitical disruptions to trade. Corporate loans which make over 25 per cent of the book is seeing good demand—especially from sectors such as semiconductors, electronics and renewable energy. The segment’s 13-per cent growth outpaced the overall loan growth in FY26. The SME segment, accounting for one-fifth of the loan book is expected to continue its momentum in FY27 too. It grew about 17 per cent this fiscal.

Retail segment which accounts for the rest of the book grew just 6.5 per cent. However, it has these levers for growth. One, mortgages are now available at about 8,000 branches from the earlier 6,800-odd. Two, merger synergy is in action in the form of rising proportion of erstwhile HDFC Ltd borrowers who have a deposit account with the bank (mainly savings account). This has risen from 36 per cent to 50 per cent in the 2.5 years of merger. This unlocks cross-selling opportunities—the bank can now sell a credit card for instance, gaining insights from the customer’s transactions in the said savings account.

Moderate treasury gains (about 5 per cent of net revenue in FY26) could be a headwind in FY27. G-sec yields have firmed up in the last three quarters. The bank has so far actively managed duration (lower duration would mean lower interest rate risk) but expects only moderate treasury gains in FY27. RBI’s recent diktat limiting open positions in the onshore currency market to $100 million is expected to dent forex trading income as well. Nevertheless, any residual repricing of term deposits could aid margin and thus prop RoA. Since February 2025, when RBI started cutting policy rate (125 bps cut so far), the bank has seen term deposits reprice by only about 50-bps.

Asset quality remains healthy with the gross and net NPA ratios at 1.2 per cent and 0.4 per cent. Standard asset and contingency provision buffers stand at about 1.6 per cent of gross advances. Capital adequacy ratio is at 19.7 per cent.

Valuation comfort

Ever since former part-time chairman Atanu Chakraborty’s unexpected exit a month ago, the stock of the bank plummeted about 13 per cent by March-end but now trades only 6 per cent lower, having made up some lost ground. The bank doesn’t appear to suffer from any material concern, going with what the numbers suggest and RBI’s statement on this regard. Meanwhile, the board has engaged experts to conduct a legal review of the former chairman’s resignation letter and the same is work-in-progress. The term (second term) of the current MD & CEO Sashidhar Jagdishan ends in October. The nomination and remuneration committee is in the process of deciding whether to extend Jagdishan’s term or to find a replacement.

Today, the stock trades at a price-to-book value multiple of 2.1x on a consolidated basis. This is at a significant discount to 2.6x – the multiple when we had originally given an ‘accumulate’ call in July 2024 (₹809). Given a volatile trade environment stepping into FY27, it does make sense to stay with a large bank with adequate buffers. Hence, long-term investors can accumulate the stock as the risk-reward is favourable at current levels. Those who do, can track the quarterly RoA as a key monitorable.

Published on April 20, 2026