HDFC Bank Q3 Results Review - Net Interest Margins Stable; RoA Maintained At 2%: IDBI Capital

IDBI Capital Report

HDFC Bank Ltd.’s net interest margin remains stable QoQ at 3.4% backed by increase in yields equivalent to rise in cost of funds. However, management guided for improvement led by portfolio mix.

Deposits grew by 1.9% QoQ (merged basis) led by retail term deposits while gross advances grew by 4.9% QoQ (merged basis) led by CRB book.

HDFC Bank's asset quality remain stable as gross non-performing asset stood at 1.26% versus 1.34% QoQ (merged basis) led by retail. Net interest income grew by 4% QoQ while pre-provision operating profit grew by 4% QoQ due to lower operating expenses.

Provisions increased by 45% QoQ resulted into credit cost at 0.7% versus 0.5%. Profit after tax grew by 3% QoQ led by lower tax rate.

We have moved to FY26E estimates and maintain 'Buy' rating with the target price of Rs 2,090 (earlier Rs 1,970) valuing parent business at Rs 1,915 (2.5 times price/adjusted book value FY26) and rest for the subsidiaries.

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