HDFC Bank expects a modest margin boost from a 25-basis-point rate increase as changing household savings habits pressure low-cost deposits, despite robust loan and deposit growth.
HDFC Bank is expecting a modest lift to margins from the December quarter, banking on a 25-basis-point rate increase to help reverse pressure from a changing deposit mix and a wider shift in household saving habits, according to its latest earnings call.
Management said the bank’s core business momentum remained healthy, even as the share of low-cost Current Account and Savings Account deposits continued to come under pressure across the system. It linked that trend to a broader movement in household savings behaviour, suggesting that rising technology adoption and changing customer preferences are reshaping how banks attract and hold deposits.
The lender also said it is working to reduce dependence on corporate liabilities and to bundle products more effectively in order to offer customers more value. At the same time, it signalled that internal operations are becoming more technology-driven, with faster processing times and better productivity likely to support service levels. Managing Director Shashidhar Jagdishan said he was leaving behind a strong platform with resilience as the bank focuses on efficiency and adapts to the challenge of shifting deposit trends.
The comments came alongside a second-quarter performance that was solid but below market expectations in several key lines. According to the bank, consolidated net profit rose 4.7 per cent from a year earlier to Rs 19,510 crore, missing estimates, while net interest income increased 10 per cent to Rs 34,619 crore, also short of forecasts. Net interest margin stood at 3.16 per cent on total assets. Asset quality improved from the previous quarter, with gross bad loans easing to 1.11 per cent and net bad loans declining to 0.37 per cent, while provisions rose to Rs 3,574 crore.
Loan growth remained robust, with average advances under management up 14.1 per cent year on year to Rs 31.87 lakh crore and gross advances reaching Rs 32.20 lakh crore at the end of September. Retail lending rose 11.7 per cent, and loans to small and mid-sized businesses increased 23.5 per cent. Average deposits climbed 16.8 per cent, including a 10.7 per cent rise in average CASA balances to Rs 9.71 lakh crore. The shares closed 0.28 per cent higher at Rs 728.85, though the stock remains well below its 52-week peak.
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