HDFC Bank Q1 FY26 profit rises 12.2%, NII growth slows amid margin pressure

HDFC Bank reported a 12.2% year-on-year rise in its standalone net profit to ₹18,160 crore for the quarter ended June 30, 2025, despite a modest 5.4% increase in net interest income (NII), which came in at ₹31,440 crore. The core net interest margin (NIM), however, slipped sequentially to 3.35% from 3.46% in the March 2025 quarter, reflecting the lag in deposit repricing amid a high interest rate environment.

The bank's profitability was bolstered by strong non-interest income, which jumped to ₹21,730 crore in Q1 FY26. This included robust transaction gains of ₹9,130 crore, along with fee and commission income of ₹7,590 crore, forex and derivatives revenue of ₹1,630 crore, and miscellaneous income of ₹2,400 crore.

However, the bottom line was tempered by a sharp increase in provisions and contingencies, which spiked to ₹14,440 crore — more than five times the ₹2,600 crore set aside in the same period last year. This includes ₹9,000 crore in floating provisions and ₹1,700 crore in additional contingent provisions, signaling a cautious stance by the bank amid evolving macroeconomic conditions.

The total balance sheet size expanded to ₹39.54 lakh crore as of June 30, 2025, compared to ₹35.67 lakh crore a year earlier, reflecting robust asset growth. Average deposits stood at ₹26.58 lakh crore, up 16.4% year-on-year and 5.1% sequentially, while average CASA (current account savings account) deposits grew at a slower pace of 6.1% YoY to ₹8.60 lakh crore.

In a shareholder-friendly move, the bank also announced the issuance of bonus equity shares in the proportion of 1:1 — i.e., one equity share of Re. 1/- for every one fully paid-up equity share held — subject to statutory and regulatory approvals and approval of members via postal ballot. The record date for determining shareholder entitlement has been fixed as Wednesday, August 27, 2025.

On a consolidated basis, HDFC Bank reported total revenue of ₹85,350 crore and a profit after tax of ₹16,260 crore for Q1 FY26.

The mixed performance underscores the bank’s strong revenue-generating capabilities but also highlights emerging pressures on margins and the need to build buffers amid potential risks in the lending environment.