HDB Financial Services Q1 profit jumps 38% as margins improve, asset quality strengthens

HDB Financial Services Ltd. on Wednesday reported a 38.3% year-on-year rise in net profit to ₹785 crore for the quarter ended June 30, supported by higher net interest income, expanding margins and improving asset quality.

The HDFC Bank-promoted non-banking finance company (NBFC) reported net interest income (NII) of ₹2,509 crore, up 19.9% from ₹2,092 crore in the year-ago period. Net total income increased 16.8% to ₹3,185 crore, while pre-provisioning operating profit rose 25% to ₹1,752 crore, reflecting healthy operating performance.

Margins expand as profitability improves

The company's profitability improved despite moderate loan book growth, aided by a higher net interest margin (NIM) of 8.4%, compared with 7.7% a year earlier.

Profit before tax climbed 44% year-on-year to ₹1,055 crore, while loan loss provisions increased only 4.1% to ₹697 crore, indicating stable credit costs during the quarter.

"The company recorded its highest-ever quarterly profit after tax of ₹785 crore, driven by healthy business growth, improved margins and continued focus on asset quality," HDB Financial Services said in a statement.

Loan growth remains healthy

Assets under management (AUM) rose 11.3% year-on-year to ₹1.22 lakh crore, while the gross loan book grew 11.4% to ₹1.22 lakh crore as of June 30, 2026.

Loan disbursements during the quarter increased 16.2% to ₹17,629 crore, indicating sustained demand across the company's lending segments. HDB Financial Services continued to maintain a diversified portfolio across enterprise lending, asset finance and consumer finance.

Asset quality improves

The lender's asset quality strengthened further during the quarter. Gross Stage 3 assets improved to 2.34% from 2.56% a year ago, while Net Stage 3 assets declined to 1.04% from 1.11%.

The company's credit cost remained stable at 2.3%, while the return on average assets (RoA) stood at 2.5%, underscoring steady profitability. Provision coverage on Stage 3 assets stood at 55.73%.

As of June-end, HDB Financial Services operated a network of 1,710 branches across 1,165 cities and towns, serving customers through its enterprise lending, asset finance and consumer finance businesses.

Shares of HDB Financial Services have declined over 10% in the past one year, underperforming the Nifty 500 index, which has slipped nearly 1% during the same period.