HDFC Bank Q2 Reports ₹18,640 Crore Net Profit in Q2FY26, Up 10.8%
The banking sector in India is navigating a complex environment of lower interest rates, cautious credit growth, and evolving asset-quality dynamics. Against this backdrop, the earnings of the private sector banks are drawing investor attention. One standout is the focus stock to watch, HDFC Bank, which announced its Q2 results for FY26. The headline: net profit of ₹18,640 crore, up 10.8% YoY. This strong showing offers investors insight into how one major lender is adapting to current headwinds while delivering growth.
Market Trend: Banking Sector Under Pressure
Challenging margins, but loan-growth momentum
Banking margins remain under pressure as lending yields compress and deposit costs lag. For HDFC Bank in Q2, net interest income (NII) rose only 4.8% YoY to ₹31,551.5 crore. Meanwhile, the net interest margin (NIM) slipped to 3.27% from 3.35% a year earlier. On the positive side, loan advances grew ~9.9% YoY, signalling that banks are still expanding volumes. This shows that banks are chasing growth by volume rather than margin, which may keep profitability steady but with modest margin tailwinds.
HDFC Bank Q2 Specifics
Revenue, profit, and income mix
HDFC Bank’s net profit in Q2FY26 reached ₹18,641.28 crore, up 10.8% from ₹16,820.97 crore in Q2FY25. Other income (non-interest income) surged ~25% YoY to ~₹14,350 crore, contributing strongly to profitability. Total revenue rose ~10.3% YoY to ~₹45,900 crore. For investors, this reveals that diversification of income beyond pure interest is helping tide over the margin squeeze.
Asset quality and balance sheet strength
HDFC Bank reported gross NPA ratio of 1.24%, down from 1.36% a year earlier, and net NPA ratio of 0.42%. Provisions and contingencies rose 29.6% YoY to ~₹3,500.5 crore, but sequentially they fell sharply. The bank also boasted a Capital Adequacy Ratio of 20.0% (Basel III) as on 30 Sep 2025. These metrics suggest that HDFC Bank is maintaining credit discipline and a strong buffer, which is a plus in the current cycle.
Growth vectors: deposits and advances
Advances grew ~9.9% YoY, with retail loans up ~7.4% and SME lending rising ~17%. Meanwhile, total deposits hit ~₹28,018 billion, up 12.1% YoY, and CASA (current + savings) deposits increased ~7.4%. For our takeaway, this means the bank is growing its loan book and deposit base in tandem, which underpins future earnings potential.
Investor Reaction & Market Sentiment
The market welcomed HDFC Bank’s surprise over-performance. Analysts expected profit around ~₹17,718 crore; the actual ₹18,641 crore exceeded forecasts. On social media, the hashtag #hdfcbank saw commentary around the results release.
Investors appear cautiously optimistic: strength in non-interest income and asset quality are positives, while the margin pressure remains a watch point. For our part, we note that sentiment is moderate-positive, hinging on whether margins recover in the coming quarters.
Looking Ahead: What to Watch
As we look into H2FY26 and beyond, key themes for HDFC Bank include:
- Margin recovery: With deposit rates re-pricing and potential loan yield upticks, margin improvement is possible. The bank expects this.
- Credit growth quality: As lending expands, maintaining low NPA and credit cost will be crucial. HDFC Bank’s current cost-to-income ratio at ~39.2% (Q2) shows operational efficiency.
- Income diversification: Non-interest income growth will remain important given interest margin headwinds.
- Macro risks: Any economic slowdown or regulatory shock could impact performance across banks.
For investors, assessing HDFC Bank hinges on whether the bank can turn growing volumes and non-interest income into sustainable earnings growth, despite margin drag.
Conclusion
In summary, the quarter underscores that in India’s banking sector, volume growth and non-interest income are serving as relief valves for margin stress. For the focus keyphrase HDFC Bank Q2, the numbers speak clearly: net profit up 10.8% to ₹18,641 crore; NII up 4.8%; gross NPA ratio down to 1.24%. While the bank has laid a solid foundation, the path ahead will depend on margin recovery and maintaining asset quality. For investors, this suggests a “steady-as-you-go” stance with upside potential if margins revive—monitor the next few quarters closely.
FAQs
HDFC Bank reported standalone net profit of ₹18,641.28 crore in Q2 FY26, up 10.8% YoY.
The bank recorded net interest income of ₹31,551.5 crore in Q2, a 4.8% increase over the year-ago quarter.
The results are solid, but margin headwinds persist. Investors should wait for signs of NIM recovery and sustained growth before buying aggressively.
Gross NPA ratio stood at 1.24% and net NPA at 0.42% as of 30 Sep 2025 for HDFC Bank, showing improvement.
The bank emphasised strong deposit growth (~12% YoY), advances growth (~9.9% YoY) including SME loans (~17% YoY), and improved non-interest income (~25% YoY).
Disclaimer:
This is for information only, not financial advice. Always do your research.
