HDFC Bank vs SBI: The king is still standing. But the challenger is closing in

Let’s dig in to find out how SBI performed on various parameters and compare its performance to its nearest rival, HDFC Bank, the largest private sector bank.

Q1FY27 Credit Surge: How SBI’s 18.9% Loan Growth Outpaced HDFC

Now, let’s analyse SBI’s core operational performance and how it compares with HDFC Bank.

SBI has the largest branch network of more than 23,000 branches pan India, and it helped the bank to give a strong challenge to the ‘nimbler and growth oriented’ HDFC Bank.

SBI grew its advances by 18.9% y-o-y to Rs 49.9 lakh crore, and to the largest bank’s credit, it had grown its SME loans by 22.3% y-o-y while agri loans grew 25.4%. Retail loans also grew 15.2% y-o-y.

Credit growth is an operational parameter of a bank that is keenly tracked.

Core operational performance of SBI v/s HDFC Bank in the June 2026 quarter

Bank	Growth in lending (% change y-o-y)	Growth in deposits (% change y-o-y)	Net Interest Margin (%)
SBI	18.9%	9.7%	3%
HDFC Bank	15.6%	14.9%	3.4% (on interest earning assets)

Smaller rival, HDFC Bank grew its advances by nearly 15.6% y-o-y to Rs 30.37 lakh crore, and the bank has highlighted loans to small and mid-market enterprises grew by 18.7% y-o-y in the quarter under review.

The June quarter is typically a ‘slack’ season for credit, with individuals, small and large companies still evaluating their financial objectives for the new financial year. Also, it is a quarter where a large number of families are on holiday and demand for credit is typically slack. It is commendable that both banks grew their loans by double digits in the quarter.

Of equal importance, SBI’s deposits grew 9.7% y-o-y to Rs 60.05 lakh crore with the bank reporting growth of 9.9% in time deposits, largely fixed deposits. And savings bank deposits grew 10.3% y-o-y.

Deposits form the basis of extending credit for a bank, short and long-term to clients.

Meanwhile, HDFC Bank grew its deposits by 14.9% y-o-y to Rs 31.67 lakh crore and that was led by a 17.4% y-o-y rise in term deposits (mainly fixed deposits) to Rs 21.45 lakh crore.

The Margin Battle: Why HDFC Bank Defends a 3.40% NIM

Net Interest Margin (NIM) is another key operational metric tracked by investors. For SBI, in its key domestic operations, it was 3% and broadly similar to a year earlier.

Earlier, HDFC Bank highlighted its NIM was 3.40% based on interest earning assets as compared to 3.5% a year earlier.

The RBI left the repo rate unchanged in its monetary policy meeting on Wednesday, and it has broadly signaled a continuation of its policy of lower interest rates in the economy and boosting overall lending in the banking system. This has created temporary pressure on NIMs of banks, like HDFC Bank, and banks have for several quarters focused on higher margin loans like gold, vehicle and SME loans.

Asset Quality Reality Check: Lowest NPA Ratios Defy Macro Headwinds

Asset Quality & Profitability (Q1FY27)

	SBI	HDFC Bank
Net NPA Ratio	0.38%	0.41%
Net NPA Ratio (Q1FY26)	0.47%	0.47%
Provisions for NPAs	₹3,359 crore	₹3,060 crore*
Standalone Net Profit	₹21,121 crore (+10.2% YoY)	₹19,059 crore (+5% YoY)
Key Takeaway	Lowest NPA ratio in over 20 years	Asset quality remains among the industry’s best

In the June 2026 quarter there was no visible local impact from the Middle East crisis, in terms of a rise in NPA levels.

SBI’s asset quality has continued to remain strong, and virtually matching HDFC Bank, which has one of the lowest NPA ratios in the domestic banking industry and is often viewed as the benchmark.

SBI’s % of net NPAs was 0.38% as compared to 0.47% a year earlier. SBI has highlighted its lowest NPA ratio in more than two decades.

SBI’s provisions for non-performing assets were Rs 3,359 crore quarter as against Rs 4,934 crore a year earlier. The largest bank in the country has highlighted that its provision coverage ratio was 74.2% and marginally lower compared to a year earlier.

SBI’s provisioning is well above regulatory requirements.

Lower provisioning helped SBI offset the near 9% y-o-y fall in other income to Rs 15,922 crore. SBI has highlighted a 31.7% y-o-y decline to Rs 4,319 crore in its profit on sale / revaluation of investments. The above decline could be partly attributed to rising 10-year government bond yields, given the Gulf War and rising interest rates globally. Rising government bond yields result in losses for banks, like SBI.

Nevertheless, strong loan growth helped SBI’s standalone net profit rise by 10.2% y-o-y to Rs 21,121 crore.

For HDFC Bank, its % of net NPAs to net advances was 0.41% as compared to 0.47% a year earlier.

Its provisions were Rs 3,059.7 crore as compared to Rs 14,441 crore a year earlier, since HDFC Bank had made a floating provision of Rs 9,000 crore for FY26. HDFC Bank had made a gain of Rs 9,128 crore in the June 2025 quarter from the offer for sale related to IPO of HDB Financial Services.

HDFC Bank’s tax expenses jumped 93% y-o-y to Rs 6,048 crore in the June 2026 quarter, and as a result, its standalone net profit rose just 5 % y-o-y to Rs 19,059 crore in the quarter under review.

SBI and HDFC Bank’s core banking operations are reflected in their respective standalone results.

Efficiency Metrics: Decoding HDFC Bank’s 1.84% Annualized RoA Advantage

SBI has highlighted its return on assets (net asset basis – annualised) was 1.1%

HDFC Bank’s return on assets (average) – not annualized was 0.46% in the June 2026 quarter, and on annualizing it would be nearly 1.8%

SBI v/s HDFC Bank – which bank is more efficient

Bank	Return on Assets (in %)
SBI	1.1%
HDFC Bank	1.8%*

HDFC Bank along with smaller rival, Kotak Mahindra Bank, have one of the highest Return on Assets (ROA) in the banking industry, over the past several quarters.

SBI’s Disappointing FY27 Loan Growth Forecast Weighs on Sentiment as HDFC Tackles Governance

Investors will continue to watch the local impact of the Middle East crisis on SBI and HDFC Bank, amongst other banks, in terms of rise in NPAs, NIMs and any signs in slowdown in credit growth, going forward.

However, the Reserve Bank of India on Wednesday raised its real GDP growth forecast for FY27 to 6.7% from 6.6%, while keeping the repo rate unchanged at 5.25%.

For SBI, investors will be keenly watching if the bank can sustain its loan growth momentum over the next few quarters. The top management in the press conference has highlighted credit growth target of 14%-15% y-o-y during FY27, and that is broadly lower than what has been achieved in Q1FY27.

In addition, volatility in government bond yields and its financial impact on SBI and other banks will be closely tracked by investors, going forward.

Meanwhile, HDFC Bank has tried to address corporate governance concerns with the recent appointment of Rajiv Kumar as part-time chairman of the bank, and he has also got RBI approval.

However, a cause for concern for investors is that in late July 2026, with regard to Maharashtra State Road Development Corporation (MSRDC) and garnering deposits in 2017 and 2021, the HDFC Board had decided to issue warning letters and monetary penalty of ₹1 lakh for three senior employees (the Managing Director & CEO, Chief Financial Officer and Group Head – Retail Assets), and warning letters for the remaining employees.

Investors will continue to keep a close eye on corporate governance at HDFC Bank, going forward.

Valuation Verdict: Assessing the 1.9x vs 2.0x Price-to-Book Gap

Now, let’s take a look at the valuations of SBI and compare it to that of HDFC Bank.

SBI v/s HDFC Bank valuations

Bank	Price-to-(standalone) book value
SBI	1.9 times
HDFC Bank	2 Times

Investors were broadly disappointed with the loan growth target of SBI for FY27, and the stock rose barely 1% to Rs 1,096 on Friday. The stock had reached a 52-week high of Rs 1,234.8 on 24 February, 2026.

On the preferred valuation matrix, price to (standalone) book value, SBI trades at 1.9 times, according to Screener.in. Over the past five years, it has traded on the above valuation matrix between 1.3 and 2.3 times.

HDFC Bank trades on the above valuation matrix at 2 times. Over the past 5 years, it has traded between 2.1 times and 4.3 times.

SBI trades at valuations lower than its nearest rival, HDFC Bank. SBI is attempting to continue the growth momentum in loans during FY27.

Readers could add SBI to their watch list of stocks for 2026 and see if its performance matches expectations.

Disclaimer:

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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