The HDFC Bank stock has emerged as one of the better performers during calendar year 2025. It’s almost as if it has not been affected by the broad FII selling that has hit Dalal Street over the past one year.

HDFC Bank, the largest private sector bank, was down 1.8% to Rs 983 in mid-Monday afternoon trade, and it is not too far from its 52-week high of Rs 1,020.4 that was reached on 23 October, 2025.

The share price of HDFC Bank has risen by nearly 15% over the past one year, easily outperforming the Sensex that gained just 10%.  

Investors have turned more bullish on HDFC Bank with signs that credit growth is showing signs of accelerating on a sustained double-digit basis, as witnessed in the December 2025 quarter update released on Monday. Credit growth is an operational parameter that is keenly tracked.

The merger of HDFC Bank and HDFC on the effective date of 1 July, 2023, had resulted in the merged entity having a credit-to-deposit ratio of nearly 105.3% at the end of the December 2023 quarter. And it resulted in HDFC Bank very cautiously growing its loan book, to the disappointment of shareholders and Dalal Street. 

For perspective, government-controlled SBI, the largest bank in the country, its credit-to-deposit ratio was just 75.3% at the end of the December 2023 quarter. 

Banks typically maintain a credit-deposit ratio of 75% to 80%.

The then RBI governor, Shaktikanta Das, in a media interaction in January 2024, had highlighted that the central bank does not prescribe any credit-deposit ratio for banks to maintain. He added that the RBI wants to ensure that there is no unnecessary exuberance in lending and that there remains some sort of correlation between credit extended by banks and deposits available with them.

To gain a deeper understanding of the acceleration of loan growth at HDFC Bank, we dug deeper into the December 2025 quarter update that was released on Monday, and compared with the loan growth reported in December 2024 quarter and that of December 2023.

The third quarter of a financial year is typically the peak credit season, and differs substantially from the typical lean credit season witnessed in the June quarter and September quarter of a financial year.  

The 11.9% rebound: Breaking the single-digit shackles

HDFC Bank’s gross advances at the end of the December 2025 quarter were Rs 28.44 lakh crore, a growth of nearly 11.9% on a y-o-y basis. The largest private sector bank has not provided detailed information on which sectors have reported strong loan growth.

Its deposit growth was 11.5% y-o-y at Rs 28.59 lakh crore in Q3FY26, and that was thanks to strong growth in time deposits (essentially fixed deposits).

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This would imply a credit-to-deposit ratio of nearly 99.5% for the December 2025 quarter.

The above data was from HDFC Bank’s Q3FY26 update that was released on Monday.

Now, before we move to comparing year on year numbers, here are some data points showing where the bank stood “pre-merger” with HDFC.

In FY23, the last full year before the merger, HDFC Bank had grown its advances by nearly 17% y-o-y to Rs 16 lakh crore, and its deposits grew by 20.8% y-o-y to Rs 18.83 lakh crore. It had a credit-to-deposit ratio of nearly 85% at the end of FY23.   On a point-to-point basis one can clearly see an overall slowdown and a higher than desired credit-to-deposit ratio. Not the best position to be in.

The post-merger hangover: Comparing Q3 performance since 2023

Now’s let’s move to comparing the quarterly numbers over the years. 

Loan growth was rather tepid in the December 2024 quarter – HDFC Bank’s advances were Rs 25.18 lakh crore, as per its quarterly results declared, a tepid growth of nearly 2.9% on a y-o-y basis.

Its deposits were Rs 25.63 lakh crore at the end of the Q3FY25, a growth of 15.8% on a y-o-y basis, and that was once again thanks to strong growth in time deposits. This would imply a credit-to-deposit ratio of nearly 98.2% for the December 2024 quarter.  

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Going even further back into history, at the end of the December 2023 quarter, merged HDFC Bank’s advances were Rs 24.46 lakh crore, as per its quarterly results declared, a growth of 62.4% on a y-o-y basis. Its deposits were Rs 22.13 lakh crore in the December 2023 quarter, a growth of 27.7% on a y-o-y basis.

This implied a credit-to-deposit ratio of nearly 105.3% at the end of the December 2023 quarter.

The numbers for 3QFY24 ofcourse are impacted by the merger, and hence, the growth rates appear to be very high. But it can clearly be seen how the credit-to-deposit ratio spiked to over 105%.

Overall, it would appear that on the advances and deposits growth front, HDFC Bank is making solid progress. On the Credit-to-deposit ratio, while there is an improvement on a point-to-point basis over two years, the latest quarterly numbers show a slight worsening off when compared to the previous year.

Efficiency kings: Why HDFC bank’s 1.96% ROA still leads the pack

HDFC Bank has a return on assets (average) – not annualized of 0.49% in the September 2025 quarter; annualizing for FY26 it would be nearly 1.96%.

Smaller rival, Axis Bank, has a return on assets (annualized) of l.23% in the September 2025 quarter.  

Valuation Floor: Trading Near 10-Year Historical Lows

HDFC Bank trades at price to (standalone) book value of nearly 2.9 times, according to Screener.in. Over the past 10 years, it has traded at price to (standalone) book value ranging between 2.1 and 6 times. Implying HDFC Bank stock is currently trading close to the bottom of its valuation.

HDFC Bank’s core banking operations are reflected in its standalone results. 

On a standalone P/E basis, the HDFC Bank stock currently trades at 21.2 times, according to Screener.in, and it has varied between 16.6 times and 32.5 times over the past 10 years.

Smaller rival, Axis Bank, trades at a price to (standalone) book value of 2.1 times, according to Screener.in, and it has varied between 1.2 times and 3.3 times over the past 10 years. Axis Bank’s core banking operations are reflected in its standalone results.

On a standalone P/E basis, Axis Bank trades at 16.5 times, according to Screener.in, and it has varied between 11 times and more than 100 times over the past 10 years. 

Investors could put HDFC Bank on their watch list of stocks for 2026, given attractive valuations and expectations of sustained loan growth, going forward.

In conclusion, the bank is making steady progress post-merger, and some of that is starting to reflect in the stock price. However, with valuations still at the bottom end of the long term band, while one can say that HDFC Bank is getting some interest from the street, there’s a long way to go before it can once again be crowned the “darling of Dalal Street”.

Disclaimer:

Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.

The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.

Amriteshwar Mathur is a financial journalist with over 20 years of experience.

Disclosure: The writer and his family do not hold the stocks discussed in this article. 

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