The country’s largest private sector bank, HDFC Bank is set to announce its Q1 earnings today. The results of HDFC Bank are particularly of interest to investors in the backdrop of the high slippages announced by Axis Bank. However, most brokerages expect a steady Q1FY26 earnings performance from HDFC Bank. It is expected to report relatively better performance.
Here is a look at the key factors to watch out this quarter:
HDFC Bank Q1 NIM: Contraction on the cards?
The margins are one of the most important factors to watch out for at HDFC Bank. With the RBI cutting the repo rate by 100 bps over Feb-June 2025, banks, especially private.
banks have been leading the rate cut transmission cycle and have cut both SA/TD rates. Thus, NIM contraction during the quarter for most banks is imminent; however, the quantum of margin compression is expected to vary based on loan mix composition, quantum of deposit rate cuts taken, and strength of the liability franchise and its mix. NIM pressures will continue into Q2FY26E and are expected to stabilise from H2FY26E onwards.
HDFC Bank Q1 NII growth seen soft
Most brokerages have predicted a steady quarter for HDFC Bank compared to PSU Banks. Specifically in terms of NII growth, they expect the trajectory to be relatively weak at 3% YoY and do not rule out some marginal degrowth QoQ.
HDFC Bank asset quality
Asset quality will remain the key area of focus in Q1. This is particularly relevant in the backdrop of the voluntary reporting by Axis Bank. However, as per most brokerage expectations, large private banks like HDFC Bank are well-positioned to weather these challenges more effectively. That said, all eyes would be on credit costs. The broad expectation is that they continue to stay elevated, particularly in the unsecured lending segment.
HDFC Bank Q1 loan growth
Brokerages believe that fee income may mirror loan growth and will de-grow significantly after a strong Q4. Treasury income is expected to be healthy for banks and should support non-interest income growth. Opex growth should remain controlled with conscious efforts by banks.
HDFC Bank bonus issue
However, one of the most important factors, from the investor perspective, is the special bonus issue that the board will be considering. The exact quantum of the bonus—the first from HDFC Bank, along with the interim dividend decision—is something that the street will be watching out for.