Investors on Dalal Street were keenly awaiting the September 2025 quarter results of leading private sector banks, in a bid to analyse if these banks have been able to protect their key operational parameter, like net interest margin (NIM) and also bank credit growth. The above development comes at a time when RBI had cut repo rates in June 2025 and also taken various measures to boost overall bank lending.
HDFC Bank, the largest private sector bank, ended Friday trade 0.8% higher at Rs 1,002.5, and not too far from its 52-week high of Rs 1,018.2 that was reached on 30 July 2025.
The Squeeze on Margins and the Race for Growth
HDFC Bank, in its results declared on Saturday afternoon, for a key operational parameter, its NIM on interest earning assets was 3.4% on total assets in the September 2025 quarter vis-à-vis 3.7% a year earlier.
The central bank had cut repo rates in its meeting in early June 2025, and while interest rates on bank loans / credit facilities have come down, interest rates on deposits with the bank come down with a lag.
And for smaller rival, Axis Bank, which had declared its results earlier in the week, its NIM domestic was 3.82% in the second quarter of FY26 vis-à-vis 4.06%.
However, for Yes Bank, it has highlighted NIM of 2.5% in the September 2025 quarter vis-à-vis 2.4% a year earlier. The bank had disbursed higher margin retail loans of Rs 14,077 crore in the September 2025 quarter, a rise of 19.8% quarter-on-quarter.
Meanwhile, for another key operational parameter, credit growth – for HDFC Bank, its advances at the end of the September 2025 quarter were Rs 27.46 lakh crore, a growth of 10%. For context, growth in credit for HDFC Bank was nearly 6.7 % y-o-y to Rs 26.28 lakh crore in the first quarter of FY26.
HDFC Banks’ advances to deposit ratio has been hovering well over 90% in the merged entity and it has been cautious in growing its loan book for several quarters.
In the case of Axis Bank, its advances grew by 11.7% to Rs 11.16 lakh crore in the September 2025 quarter, and that was thanks to strong demand for loans against property, small business loans and others – supply chain finance and gold loans.
And for Yes Bank, its advances were Rs 2.5 lakh crore, a growth of 6.4% y-o-y in the September 2025 quarter.
The Cost of Caution: Provisions Take a Bite Out of Profits
HDFC Bank has made provisioning to the tune of Rs 3,500 crore in the September 2025 quarter vis-à-vis Rs 2,700 crore a year earlier. HDFC Bank in its investor presentation has pointed out to floating and general provisions it has made in the September 2025 quarter, to explain the above. Its % of net NPAs to net advances was 0.42% in the September 2025 quarter vis-à-vis 0.41% a year earlier. Higher provisioning resulted in HDFC Bank’s standalone net profit rising only 10.8% y-o-y to Rs 18,641.3 crore in the second quarter of FY 26.
For Axis Bank, its provisioning was Rs 3,547 crore in the September 2025 quarter vis-à-vis Rs 2,204 crore a year earlier. Axis Bank has pointed out that following an RBI advisory, post its FY25 annual inspection, the Bank in Q2 FY26 made an additional one-time standard asset provision of Rs 1,231 crores for two discontinued crop loan variants. This standard asset provision will be written back when all the outstanding loans in the two discontinued product variants are recovered or closed in normal course or by March 31, 2028.
Its % of net NPAs was 0.44% in the September 2025 quarter vis-à-vis 0.34% a year earlier. Higher provisioning at Axis Bank, resulted in net profit at Rs 5,089 crore in the September 2025 quarter, a fall of nearly 26% y-o-y.
And for Yes Bank, its provisions were Rs 419 crore in the September 2025 quarter vis-à-vis Rs 297 crore a year earlier. Its % of net NPA was 0.3% in the second quarter of FY26 vis-à-vis 0.5 % a year earlier. Nevertheless, its growth oriented approach helped Yes Bank standalone net profit rise 18.3 % y-o-y to Rs 654.47 crore.
The Efficiency King: Why HDFC’s RoA Still Dominates
HDFC Bank’s return on assets (average) – not annualized was 0.49% in the September 2025 quarter, and on annualizing for FY26 it would be nearly 1.96%. For Yes Bank, its return on assets (average) (annualized) was 0.6% in the September 2025 quarter, and for Axis Bank, return on assets (annualized) was 1.23%. Clearly, HDFC Bank is far ahead of rival.
Outlook and valuations
Investors will continue to monitor leading banks in their ability to grow their loan books and at the same time their NIM. And the ability of banks to acquire low-cost deposits and grow their loan books via their pan India branch network remains key.
In the case of Yes Bank, Japan-based SMBC became the biggest shareholder by acquiring a 24.2% stake, and investors will be keeping a close eye on the operational strategy of the bank over the next few years.
For Axis Bank, investors will continue to pay special attention to its provisioning requirements, going forward.
HDFC Bank trades at a P/E of nearly 21 times estimated standalone FY26 earnings. Axis Bank trades at a P/E of 16 times estimated standalone FY26 earnings, and for Yes Bank it is more than 20 times.
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
Disclosure: The writer and his family have no shareholding in any of the stocks mentioned in the article.
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