HDFC Bank Q4FY26 earnings: All focus back on governance and leadership

HDFC Bank ’s upcoming March-ended quarter and FY26 earnings come into focus on Saturday (April 18), where leadership succession at the bank is likely to gain significance over the regular quarterly performance.

Nearly a month after the sudden exit of HDFC Bank’s former part-time chairman Atanu Chakraborty, several questions remain unanswered. Chakraborty had cited that certain “happenings and practices” at the bank over the past two years, were not in congruence with his “personal values and ethics”.

Besides the board, HDFC Bank’s Nomination and Remuneration Committee (NRC) will also be meeting on April 17. It is expected to deliberate on the appointment of a new chairman. Keki Mistry, HDFC Bank’s current part-time chairman, holds a three-month term which started March 19.

The Bank will, also, not immediately send up the name of the candidature for CEO to the Reserve Bank of India (RBI). This could be done by April-end.

The Q2FY27 (July-Sept 2026) period is the last month of current CEO Sashidhar Jagdishan, whose [second] term ends on October 26, 2026.

Leadership up for discussion

‘The pre-dominant discussion for the Bank will be on the leadership,” a banking analyst told Fortune India, on condition of anonymity. The HDFC Bank’s board has reiterated in their communication to media and analysts that they are backing Jagdishan completely to continue leading the bank for a third term.

“The truth is the bank has not come clean [on Chakraborty’s exit]. This is where the next couple of months are crucial to portray if they are backing Jagdishan or not. If Jagdishan indeed gets the backing from the board – and approval from the RBI – it could raise fresh voices from foreign investors, that the board was not willing to recognise the problems which had cropped up,” the analyst added.

Alternatively, if a fresh leader were to be chosen, it could lead to a few more quarters of weakened earnings for the bank, as it deals with fresh strategies for growth.

In recent weeks, data shows that foreign investor sell-off in the HDFC Bank stock was high; the shareholding is now down to 44.05% in the March-ended quarter from an earlier 47.67% in the previous December-ended quarter.

Now nearly a month since Chakraborty’s exit, the stock is flat at Rs 794 at the BSE on April 16, from Rs 798 on March 18 when the announcement of Chakraborty’s exit took place. Despite the firefighting from the Board – in the form of an independent action of firing several senior executives linked to allegations of mis-selling Credit Suisse Additional Tier-1 bonds and the appointment of law firms Wadia Ghandy and Trilegal to trace Chakraborty’s concerns, investor do not seem fully convinced about whether the worst is behind the bank, in terms of governance and leadership concerns.

Jagdishan’s term has seen a range of issues impacting the Bank from a regulatory ban on issuance of new credit cards; the need for an upgrade in technology platforms; the exits of senior management staff to Chakraborty’s exit.

A second analyst at an equity research firm said there were other concerns for the bank. “The first is deposits, whether the pace of growth would sustain keeping in view the banking ecosystem. The second concern would be margins, considering that the rise in wholesale deposits due to their higher interest rates, hurts expenses and trims margins.”

Re-rating of stock delayed

Axis Direct, part of Axis Securities, in a note shared after Chakraborty’s exit, said: On an operational basis, HDFC Bank has been consistently performing on its guidance in its endeavour to revert to its pre-merger [with HDFC] levels across metrics. However, the stock has already de-rated significantly. While re-rating was contingent on the Bank’s performance improving and RoA stabilising at near pre-merger levels, the current development will further delay re-rating of the stock.”

“Governance credibility and management stability remain critical factors and ambiguity, especially around board-level exits citing values and ethics, would result in a near-term cap on upside, despite operational performance remaining healthy and on an improving trajectory,” Dnyanada Vaidya and Abhishek Pandya of Axis Securities added.