HDFC Bank Ltd Q4FY26 Result Update

HDFC Bank Q4FY26 marks a growth re-acceleration. Post-merger, the bank’s key focus was on accumulating deposits and bringing down the LDR ratio. This meant slower growth in advances and subdued topline growth. Now, the LDR ratio is within manageable levels and management has reiterated its focus on delivering growth. This is reflected in FY26 performance, where the bank’s loan growth stood at 12% YoY, up from 5.5% in FY25. Ahead of system credit growth of 10.5-11.5%. The gain in momentum seen in the second half of FY26 is driven by both corporate and retail segments of the loan book performing well. On the corporate side, lending has improved over the last three quarters as lending rates declined due to recent rate cuts, while bond yields have risen, with G-sec yields moving up slightly due to geopolitical tensions. This acted as a tailwind, driving a shift toward bank credit. CRISIL projects 9-10% corporate credit growth in FY27. We believe the bank’s corporate credit growth will be broadly in line with industry growth and largely working capital-led, as private capex intentions remain subdued amid geopolitical uncertainty. Meanwhile, retail growth is accelerating across vehicles, personal loans, gold loans, and mortgages, supported by rate cuts, GST rationalization, and expansion of mortgage distribution from 6,800 to 8,000 locations. While rate cuts and GST changes are one-off in nature and their impact will taper on a higher base, mortgage growth reflects merger benefits becoming visible. Home loan penetration has increased from 36% to 50% since FY24, bringing higher cross-selling opportunities across credit cards, insurance, and other products. CRISIL projects 14% retail credit growth for FY27. Given the strong retail credit cycle, we believe the franchise is well positioned to grow faster than the system. On the liability side, the bank has consistently gained 40-50 bps of deposit market share annually over the past five years. With the rate cut cycle nearing its end, visibility on funding improves enabling better planning. System liquidity has eased and softer equity markets have supported deposit mobilization across the system. We expect the bank to continue gaining market share going forward. The Chairman’s resignation was a key event for the bank this quarter but it did not trigger any visible deposit outflows, indicating depositor behavior remains largely inelastic. The DIFC-linked Chairman resignation is largely priced in and is being handled through an external legal review. Further updates remaining key from a corporate governance standpoint. Keki Mistry has board and management backing to continue as Vice Chairman beyond the interim period. CEO Sashidhar Jagdishan has clarified that he has not expressed any intention to step down, and the NRC will take up his reappointment ahead of his October 2026 tenure end. Overall, credit growth of 13-14% is the base case for FY27, slightly above system growth. With improving operating momentum and easing balance sheet constraints, the bank remains a steady compounder.