EPS of $23.29 increased by 5.2% from previous year
Gross margin of 100.0%
Net income of 178.26B
""We are well positioned, as we speak, looking at our portfolio that we don't have too much of a worry at this juncture."" - Sashidhar Jagdishan
HDFC Bank Limited (HDB) Q2 2025 Financial Results Analysis - A Stronger Position Amidst Market Challenges
Executive Summary
HDFC Bank Limited delivered strong financial results in Q2 2025, with total revenue of ₹1,214.57 billion representing a year-on-year growth of 12.91% and a quarter-on-quarter increase of 3.81%. The net income for the quarter was ₹178.26 billion, marking a 6.03% year-over-year increase. Management highlighted a stable liquidity environment, strong deposit growth driven by retail banking, and cautious loan growth strategies amid elevated credit quality concerns. The bank's gross non-performing assets (NPAs) remained stable at 1.4%, which, along with healthy margins, positions HDFC Bank favorably to capitalize on future growth opportunities as the credit environment normalizes post high-interest phases.
**EBITDA:** ₹239.68 billion with an EBITDA margin of 19.73%.
**EPS:** ₹23.40, up 5.22% YoY
**Net Profit Margin:** 14.67%
Financial Highlights
### Revenue Performance
- Revenue: ₹1,214.57 billion (YoY +12.91%, QoQ +3.81%)
- Net Income: ₹178.26 billion (YoY +6.03%, QoQ +8.20%)
- EBITDA: ₹239.68 billion with an EBITDA margin of 19.73%.
### Profitability Metrics
- EPS: ₹23.40, up 5.22% YoY
- Net Profit Margin: 14.67%
- Operating Income Growth: +14.31% YoY.
### Balance Sheet Health
- Total Assets: ₹41.52 trillion
- Total Liabilities: ₹36.55 trillion
- Equity: ₹4.82 trillion
- Loan-Deposit Ratio: Currently aims for a LDR of 87%-90% in 2-3 years, down from current levels of 110%.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1,214.57B
12.91%
3.81%
Gross Profit
1,214.57B
92.77%
3.81%
Operating Income
239.68B
14.31%
3 460.69%
Net Income
178.26B
6.03%
8.20%
EPS
23.40
5.22%
7.98%
Key Financial Ratios
grossProfitMargin
100%
operatingProfitMargin
88.3%
netProfitMargin
24.5%
returnOnAssets
0.43%
returnOnEquity
3.7%
debtEquityRatio
1.38
dividendPayoutRatio
71%
priceToBookRatio
2.77
priceEarningsRatio
18.74
Net Income vs. Revenue
Expense Breakdown
Management Commentary
### Management Insights from Earnings Call
- Sashi Jagdishan (CEO): "Liquidity has been gradually improving... However, the deposit rates continue to be elevated and sticky. Our deposit growth is strong, averaging 15% YoY, while retail branches contribute approximately 84% of total deposits." "We expect FY25 loan growth to lag the system, with FY26 at par, and FY27 exceeding system growth rates."
- Srinivasan Vaidyanathan (CFO): “Our margins have stabilized between 3.45% and 3.50%, indicating a healthy balance between deposit growth and interest demands from customers.†“Gross NPA has remained stable at approximately 1.4%, and we have observed improved asset quality amidst a challenging market.â€
### Major Themes
- Liquidity Management: Focus on growing deposits amidst sticky deposit rates.
- Loan Growth Strategy: Careful management of loan and deposit ratios to align with market conditions.
- Credit Quality: Maintaining a robust asset quality while navigating market challenges.
"We are well positioned, as we speak, looking at our portfolio that we don't have too much of a worry at this juncture."
— Sashidhar Jagdishan
"We want to ensure that the balance sheet and our financial statements are very resilient in the medium to long-term."
— Srinivasan Vaidyanathan
Forward Guidance
Going forward, HDFC Bank's management anticipates a more favorable regulatory environment as they focus on the implications of the RBI’s draft circular on lending practices. Investors should monitor their growth strategy, particularly regarding their CD ratio adjustment efforts, which aim to accelerate loan growth in line with industry averages as the credit environment normalizes. Management has guided for stable net interest margins, projecting adjustments rather than significant shifts in margins due to market conditions.
Key factors to watch:
- Adjustments to the Loan-Deposit Ratio (LDR)
- Impact of regulatory changes on lending practices
- Growth trajectory against competitors in retail banking and wealth management helps in building a resilient portfolio.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
HDB Focus
1.00%
88.30%
3.70%
18.74%
USB-PH
1.01%
20.60%
2.84%
5.21%
BSBR
1.19%
66.10%
3.08%
14.11%
SHG
1.00%
1.00%
2.65%
4.21%
FBP
9.91%
32.70%
5.08%
10.02%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
HDFC Bank's earnings trajectory, combined with a solid balance sheet and a steady strategic focus on managing deposits and lending growth, presents a compelling case for long-term investment. While short-term market conditions pose some risks, the bank's efforts to enhance asset quality and maintain liquidity position it favorably. The growth in both deposits and retail loan portfolios will be crucial for sustaining long-term shareholder value, making HDFC Bank a strong candidate for investors focused on stability and modest growth in the financial services sector.
Key Investment Factors
Growth Potential
HDFC Bank has sustained strong revenue growth and a well-managed loan portfolio, indicating solid potential for future earnings as the economy stabilizes. The planned branch expansion and higher deposit base provide avenues for increasing market presence.
Profitability Risk
Continued regulatory scrutiny and market volatility pose risks to profitability. Additionally, the high loan growth expectations in a tightening credit environment may pressure NIM.
Financial Position
With total assets of ₹41.52 trillion and robust capital adequacy, HDFC Bank remains well-capitalized to pursue growth while managing risks. The significant equity base and consistency in net income provide confidence in financial stability.
SWOT Analysis
Strengths
Strong brand equity and customer loyalty
Diverse portfolio across retail, commercial, and investment banking
Robust asset quality with stable NPAs (1.4%)
Weaknesses
High competition in the retail banking sector may pressure margins
Dependence on interest income, making it vulnerable to rate fluctuations
Opportunities
Expanding digital banking capabilities to enhance customer reach
Growth in the Indian economy provides opportunities for credit expansion
Potential benefits from easing regulatory measures
Threats
Rising inflation and market volatility affecting consumer spending
Regulatory changes that could impact profitability or operations