HDFC Bank Ltd Quarterly Results Q4 FY 25 stock analysis

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Sector Outlook: Positive

Net Profit Beats Estimates; Outlook Bright

HDFC Bank delivered a strong Q4FY25 performance, beating market expectations on net profit, which rose 6.7% YoY to ₹17,616 crores. Net Interest Income came in at ₹32,070 crores, growing 10.3% YoY, while Pre-Provision Operating Profit (PPOP) was ₹26,537 crores, slightly down YoY due to a high base last year from exceptional gains. Provisions dropped sharply by 76.4% YoY. Asset quality remained stable with Gross NPA at 1.33% and Net NPA at 0.43%. Capital adequacy stood strong at 19.6%. Deposits grew 14.1% YoY to ₹27.15 lakh crores and advances rose 5.4% YoY, led by growth in retail and rural loans. Subsidiaries also showed mixed performance: HDB Financial Services posted a 20% drop in profit, while HDFC Life and HDFC Ergo reported solid profit growth. The board has proposed a ₹22 dividend per share, with the record date set for June 27, 2025.

Key Concall Highlights

Strong Deposit Growth: Average deposits grew by 15.9% YoY, outpacing loan growth. This helped reduce the Credit-Deposit (CD) ratio to 96% from a peak of 110% post-merger.
CD Ratio Stabilisation: No major adjustments are expected in FY26. The ratio is gradually moving toward a healthier level.
No Aggressive Pricing War: The bank won’t enter into abnormal deposit rate hikes to compete with peers, even though other banks have cut rates by 30–45 bps.
Optimising Assets: The bank is reorganising its lending side to make better use of its resources, improve returns, and meet priority sector lending (PSL) norms efficiently.
PSL Compliance: Slight shortfalls in segments like small/marginal farmers are managed via PSLCs, IBPCs, PTCs, or RIDF – without impacting Return on Assets (RoA).
Stable CASA & NIM: CASA ratio usually improves a few quarters after RBI rate cuts – this trend is expected to continue. Net Interest Margin (NIM) is stable between 3.4%–3.5%, and Cost of Funds remains steady at 4.9%.
Borrowing Mix Improved: Borrowings have dropped from 18% to 14%, which is good for controlling the cost of funds. Lower CRR requirements since December also helped.
Tech Investments: Heavy investment in tech over recent years is expected to pay off soon. The bank plans to reveal more updates in this space.
Rural Expansion Continues: Earlier, the bank reached 2.25 lakh villages. Now, it’s focusing on deeper rural presence—offering loans like two-wheeler and auto loans to farmers.
Stable Returns: The bank has consistently maintained a 2% RoA over the last 10–15 years and expects to continue this performance.
Macro Confidence: RBI’s shift to an accommodative stance and two recent rate cuts are seen as positive for future growth and profitability.

Valuation and Outlook

HDFC Bank, India’s biggest private lender, reported strong Q4FY25 results with net profit beating expectations. While net interest margins dipped slightly, this was in line with earlier guidance. The bank had already shared its plan to reduce its Credit Deposit Ratio (CDR) by focusing more on deposits than loans, which explains the slower credit growth this year. Throughout FY25, deposit growth remained solid, even though lending was cautious. Asset quality stayed stable, thanks to careful lending practices. The bank is also cutting down on expensive borrowings and adjusting smoothly after the merger. In FY26, margins are expected to recover as more loans come from retail and commercial real estate. Subsidiaries like HDFC Life and HDFC Ergo are performing well, helping offset weaker results from HDB Financial. Overall, HDFC Bank showed balanced growth despite a challenging environment, and its strategy for the next year will be key to watch.