Steady growth, marginal asset quality decline, and slower loan expansion post-merger raise questions on stock performance and investor strategy.
January 23, 2025: HDFC Bank, India’s largest private-sector lender, announced its Q3FY25 results on January 22, reflecting steady performance amidst slower loan growth and slight deterioration in asset quality. The bank reported a 2.2% rise in its standalone net profit to ₹16,735.50 crore, compared to ₹16,372 crore in the same quarter last year.
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Key Financial Highlights:
- Net Profit: ₹16,735.50 crore, up 2.2% YoY
- Net Interest Income (NII): ₹76,006.8 crore, an 8% YoY rise
- Gross NPA: ₹36,018.58 crore (1.42% of gross advances), up from 1.26% YoY
- Net NPA: ₹11,587.54 crore (0.46% of net advances), up from 0.31% YoY
- Deposits Growth: Average deposits grew 16% YoY to ₹24.52 lakh crore.
The bank’s merger with HDFC in 2023 has added a significant loan portfolio, but it also created challenges in deposit accumulation, leading to tighter credit growth in Q3FY25.
Asset Quality and Operational Metrics
HDFC Bank’s asset quality showed a slight decline, with gross NPAs rising to 1.42% of gross advances from 1.26% in the same period last year. Operating expenses grew 7.2% YoY, while CASA deposits showed a modest 6% YoY growth.
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The bank’s net interest margin (NIM) stood at 3.43% on total assets, reflecting challenges in CASA accretion and pressure from high-cost borrowings. However, the bank’s disciplined underwriting and risk-calibrated lending are expected to support long-term asset quality.
Stock Performance and Technical Analysis
HDFC Bank shares closed 1.42% higher at ₹1,665.05 on January 22, delivering a 15% return over the last year. However, the stock has dropped over 7% year-to-date in 2025.
Technical analysts advise maintaining a stop-loss at ₹1,610, with a fresh breakout expected above ₹1,730. For new buyers, analysts recommend a strict stop-loss at ₹1,670 and a short-term target of ₹1,800.
Conclusion: Buy, Sell, or Hold?
HDFC Bank remains a strong contender in the banking sector despite challenges. For existing shareholders, holding with a stop-loss is advisable, while new investors should wait for a decisive breakout before entering. The bank’s focus on balancing credit-deposit ratios and maintaining asset quality will be key drivers in the coming quarters.
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