HDFC Bank profit rises 5% as provision drop offsets NII miss

HDFC Bank reported a net profit of Rs 19,060 crore for the first quarter of fiscal 2027, a 5% year-on-year increase. The result exceeded Nomura's estimate of Rs 18,780 crore but fell short of the Rs 19,691 crore forecast by Kotak Institutional Equities.

Net interest income grew 7% year-on-year to Rs 33,534 crore, up from Rs 31,438 crore in the same period last year. However, this core metric missed the expectations of both Nomura, which projected Rs 33,580 crore, and Kotak, which estimated Rs 34,383 crore. The shortfall suggests the bank is still navigating margin dynamics as it manages its enlarged post-merger loan book.

Asset quality metrics presented a mixed picture that will likely draw scrutiny from credit analysts. Gross non-performing assets fell more than 3% year-on-year to Rs 35,846 crore, bringing the gross NPA ratio to 1.17%. Yet, this represented a slight sequential increase from 1.15% in the previous quarter. More concerningly, net non-performing assets rose slightly to Rs 12,357 crore, pushing the net NPA ratio up to 0.41% from 0.38% in the fourth quarter of fiscal 2026.

The earnings growth was heavily supported by a dramatic reduction in provisions, which plummeted 79% year-on-year to Rs 3,060 crore. While this was a 17% sequential increase from the prior quarter's Rs 2,610 crore, the low annual provisioning level raises questions about whether the bank is building sufficient buffers against the mild uptick in net bad loans. Concurrently, the capital adequacy ratio declined to 19.57% from 19.71% in the preceding quarter.

The equity market appears to be weighing these underlying credit pressures against the headline profit growth. HDFC Bank shares have fallen around 1% in the past week despite gaining over 4% in the last month. Overall, the stock remains down more than 17% year-to-date in 2026, reflecting persistent investor caution regarding the lender's post-merger integration and asset quality trajectory.