HDFC Bank’s net interest margin (NIM) has expanded 2-3 basis points (BPS) for the end of March (Q4Fy25), which is gradually except for the interest income for income tax refund and 3.46% to 3.46% from year to year. 700 crores. Although it is laudable, it will be interesting to see how the Bank Reserve Bank of India (RBI) behaves with a rate-cutting cycle, which is likely to be deeper than before being envisaged.
The RBI has cut the repo rate from 25bps to 6%in February and April. With the regulator introducing retail inflation to the Consumer Price Index (CPI) or FY26 at 4%, the actual interest rate, ie with a nominal repo rate minus inflation, may be currently cut at 2%. A base point is one-sixth part of a percentage point.
During the post-earnings call, HDFC Bank revealed that about 70% of its loans are based on a floating rate (one of them is connected to the repo rate), with the rest of the fixed-per loans. The effect of cutting the cumulative repo rate of 50bps will begin to show in Q1fy26 results, as the repetition of loans has an interval effect of about one to two months before.
Bank reduced interest rate on savings accounts with balance below In April, 25bps reduced your word deposits for 50 lakhs and various maturity slabs. Since loans are rapidly republiced compared to deposits, most debt is at floating rate, investors have to handle themselves for negative effects on NIMs in short term.
strengths and weaknesses
While NIM can come under pressure in the upcoming quarters, does the bank have a volume growth liver to combat it? The bank’s balance sheet expanded 8% in single digits for FY25. Until the expansion rate occurs physically, it is likely that the increase in net interest income (NII) may remain subdued for at least a few quarters.
Q4Fy25 results are satisfactory with NII (except interest on income tax refund) 31,366 crore. While progress under management (including securities loans) increased by 7.7%, deposits increased at a rapid pace of 14.1%. The increase in fee income was 6.3%, which was mainly inspired by an impressive jump in income from distribution of third-party products up to 14.4%. 2,380 crores.
Thus, the main net income, an amount of NII (except interest on income tax corresponds) and fee income increased to 7.5%. 39,866 crores. Given many uniform items in income and expenses during Q4Fy25 and Q4Fy24, it only helps to focus on core net income comparison. For example, there was a major component of floating provisions in provisions and contingencies in base quarters 10,900 crores.
The quality of the bank’s property remains flexible, stable at 1.1% with gross NPAs (except agricultural loans), although Q3Fy25 is slightly lower than 1.2%.
The bank’s historical return on the average assets (ROAA) in the last decade is in the limit of 1.9%-2.1%. Even if the total assets of the bank have been received for a 10% growth rate FY26, the average assets of two years, IE FY25 and FY26, comes for, 41 trillion. On 1.9% ROAA, it should get net profit after almost tax 78,000 crores for FY26.
Except for the evaluation of approximately estimated subsidiaries 2.3 trillion from HDFC’s current market capitalization 14.6 trillion, Standalone Bank has about 16X net profit for FY26. However, investors may want to wait for the trough NIM in the quarters coming before taking a dip.
