India’s largest private sector lender, HDFC Bank, has reported a strong set of numbers for Q4 FY26, signaling a clear recovery after its post-merger slowdown. The bank delivered better-than-expected profitability, improving asset quality, and a healthier balance sheet — all pointing toward a steady comeback.

Profit performance beats expectations

HDFC Bank reported a profit after tax of ₹19,221 crore for the fourth quarter of FY26. This marks a 9.1 percent year-on-year growth and comes in significantly above analyst expectations, which were in the range of ₹16,500 crore to ₹17,500 crore.

For the full financial year FY26, the bank posted a net profit of ₹74,671 crore, registering a 10.9 percent increase compared to FY25. The steady earnings growth indicates that the bank has regained operational momentum.

Asset quality shows strong improvement

One of the biggest highlights of the results is the sharp improvement in asset quality.

Gross non-performing assets declined to 1.15 percent from 1.33 percent a year ago. Net NPAs also improved to 0.38 percent from 0.43 percent. This reduction clearly shows that the bank has managed to clean up its loan book effectively.

Provisions for bad loans came in at ₹2,610 crore, which is down 17.5 percent year-on-year. The fall in provisioning reflects lower stress in the loan portfolio and normalization of credit costs.

The overall trend suggests that the bad loan cycle is now largely behind the bank.

Balance sheet repair largely complete

HDFC Bank has made significant progress in strengthening its balance sheet following the merger.

The credit-deposit ratio declined to 95.3 percent from 99.5 percent in the previous quarter, indicating better liquidity management. Deposits have been growing faster than loans for the third consecutive quarter.

The loan book expanded 12 percent year-on-year to ₹29.6 lakh crore, while the deposit base grew 14.4 percent year-on-year to ₹31 lakh crore.

The bank’s capital adequacy ratio stands at 19.71 percent, which remains at very strong levels and provides a solid cushion for future growth.

These metrics suggest that the post-merger integration process is now largely complete.

CASA ratio and margin pressure remain key watch areas

One area that continues to be closely monitored is the CASA ratio, which stands at 34.1 percent.

Savings deposits grew 10.8 percent year-on-year, which is healthy. However, time deposits grew faster at 15.5 percent, indicating that customers are still preferring fixed deposits due to higher interest rates.

This shift is putting pressure on net interest margins. Margins are currently at 3.38 percent, showing signs of stabilization. However, a meaningful recovery in margins is expected to be tested in FY27.

Dividend and stock outlook

The bank has declared a total dividend of ₹15.50 per share for FY26.

Despite improving fundamentals, the stock has corrected around 25 percent in 2026 and is currently trading at approximately 1.5 times its book value.

Analysts are maintaining a positive outlook, with 12-month target prices in the range of ₹2,000 to ₹2,250, suggesting potential upside from current levels.

Conclusion

HDFC Bank’s Q4 FY26 results indicate that the bank has successfully navigated its post-merger challenges.

Profit has exceeded expectations, loan growth remains steady, and asset quality has improved significantly. The balance sheet is stronger, and credit costs are normalizing.

While margin pressures due to CASA mix remain a concern in the near term, the overall fundamentals of the bank have improved considerably.

The key takeaway is clear: the business performance has recovered, and the only missing piece now is market re-rating.

Disclaimer:
This article is for informational and educational purposes only and should not be considered as financial or investment advice. The data mentioned is based on publicly available information and company disclosures. Investors are advised to do their own research or consult a qualified financial advisor before making any investment decisions. The author and publisher are not responsible for any financial losses incurred based on this information.