← Throughline · holding view Deep analysis ↗ Q4 FY26
HDFCBANK HDFC Bank Ltd · Other Q4 FY26 · concall
Pattern: fy27 loan growth trajectory

FY26 closed at 12% loan growth vs 13.5% system (below target).

6 weak · 7 clean — pushback across 6 of 13 Q&A turns

Focused evidence 6 of 13

Mahrukh Adajania · Tara Capital Partnersweak

What kind of growth trajectory should we look at for FY27? The earlier guidance was of above sector growth, but the sector growth has also moved up substantially?

Our loan growth last year was 5%, and our loan growth this year is 12%. So we will continue to have a good momentum and trajectory in our growth. But you have to keep in mind what the geopolitical situation and that fallout is going to be. We are confident that we see the positivity continuing. We've not seen any alarm bells go up as yet. And therefore, we will continue to focus on all these areas that I covered earlier.

Kunal Shah · Citigroupweak

On growth - we indicated we will try to grow in line with industry average, but industry is now upwards of 15% and we are at 12%. Next year, would we retain guidance of growing above industry average or in line? And on deposits, how much is transitory? We earlier said we will focus on sustainable deposits even during period end. The difference between end of period and average deposit is quite high this quarter.

The first one is on the growth in the system. At least through large part of FY26, the nominal GDP growth expected was around 9%, 9.5%, so consensus was a system credit growth of around 10.5% to 11.5%. We calibrated our strategies and our growth in line with that, and that is why we grew at 12%. The system, you have said 16% or 15%. But when you compare the period-end numbers as of 31st March, which is published by the RBI, it comes to somewhere around 13.5% to 13.9%. That's the system growth. It has been faster. It is something we have to navigate, but it's not too far away from the momentum we have seen from 5.4% growth in FY25 to a 12% growth. We are very well positioned to continue that kind of a momentum in a manner that we do responsible growth. We don't want to overstretch beyond what could potentially have some landmines in the future. On deposits - the retail has always been about 80% to 85% of total deposits. Within that, the granularity has stepped up significantly. The less than INR 3 crores deposits mobilized in 2026 on net basis has grown almost 74% over the net incremental deposits for FY25. What constituted 31% of total net accretion in FY25 now constitutes 47%. These are very less volatile and very sustainable.

Pranav · Bernsteinweak

On guidance - you said LDR is no longer kind of relevant or a constraint. And on loan growth you would rather focus on improving momentum than benchmarking the system. Is there one metric you use internally to assess performance that captures these pushes and pulls? And on NIMs - borrowings have come off almost 11% YoY but the NIM trajectory is broadly similar to peers. So is that something you expected a year back? Will a reduction in borrowings have a meaningful impact on NIM going forward?

Changing of the borrowings mix is a favorable item where costs that are higher, essentially the spreads you pay, you can save on that. However, the rate cycle - when you go back about a year, in March/April of last year, the rate reduction cycle had just started in February. There was no kind of an indication it would end down 125 basis points. Rate reduction of 125 basis points was not anticipated last March/April. About 70% of the loans are floating rate and immediately the transmission takes place. Time deposit rate of growth was 15.5% year-on-year when total deposit rate of growth was 14.4%. There is a higher propensity towards time deposit, which is higher priced than CASA. So it is morphed from one type of funding which is borrowing into another type of funding which is also higher than CASA. So that is where it has gone to be and still yet to unlock fully. On NIM - the policy rate when it started to come down, the assets came down faster. The deposit transmission has happened only about 40 to 50 basis points so far. The rate cycle is currently paused. The securities market is showing rates have gone up a bit. We don't want to hazard a guess whether the rate reduction cycle is done. The quarter was 1.96, but the year was 1.94, similar to the full year that you saw last year on the return on asset.

Rikin Shah · IIFL Capitalweak

On yield on investments - this number is down about 60 basis points in the last two quarters and the overall yields have gone up. Why is the interest income on investment yields going down? Also could you highlight the cost of deposit and the residual repricing remaining? And on treasury gains - seems no impact despite yield movements and RBI move.

Investment yields have been coming down until the geopolitical risk started to increase, at which time it started to go up. It's an effect of what some of the maturing book that goes out and what the new book comes in. Given the size of the book, when you pick up a new security at this new yield, it's a drop in the ocean. It will take time to bring it in. So all you are seeing is the effect of the previous rate cycle moving in. There is something called duration - in the rate cycle, treasury manages the book they want. Certain duration aspects, previously 5-plus years duration goes to 4-plus something. On cost of funds - we published cost of funds, which is about 4.4% or so. From last year to this year, it has come down by 50 basis points or so. Residual repricing, if everything else remains the same, there will be further reduction coming on the residual because the time deposit takes 5, 6 quarters or so to go. All else remaining same, there is a tendency for the repricing to factor in more.

Rikin Shah · IIFL Capitalweak

On treasury and FX - there seems to be no negative impact in this quarter. How do we think about it going ahead?

There is some negative impact. The rate of growth on the treasury income is modest. I'm talking about the FX component of the treasury. It's modest because there is a volume impact. Due to various risks on the foreign exchange trade, there have been lower volumes and lower spreads too. And also there is some impact of the unwinding that is also there.

Abhishek Murarka · HSBCweak

On the third-party distribution fee - on a full year basis, growth has been hardly 3.5%, lagging overall customer growth and retail asset/liability fee growth. What is leading to this? Is it slowdown or cross-sell becoming difficult or refocusing on products? And on margins - you said there's some repricing of TDs left which should be positive but loan mix is gradually changing more towards corporate. How should we look at margins from here for next year - does it trend down or flatten out?

The third-party products revenue growth has been modest. Volume growth has been modest - positive, but modest given whatever preferences customers have. Last year there was a good amount of spike that we saw as we entered into the fourth quarter FY 25. So there's some volume kind of tepidness we have seen. Second thing is in terms of spreads - the mix of products that determine the spreads has also impacted. Earnings on third-party commission is also subject to mix of products taken. So mix had an unfavorable impact, meaning lower realization of income. On the NIM - transmission has happened on assets and mix of assets can impact. Cost of funds - time deposit repricing can continue. There's a stiffness in the rates across. For at least 4 months, we have not seen a time deposit rate change in the market. We're fairly priced with competition. The geopolitical things in March have hardened the rates again. It remains to be seen, but it's range bound. Focus more on the returns - if this becomes where it continues to be within a small range bound, then we work towards getting returns stable to going up through other levers.

▸ Other Q&A (7)
Mahrukh Adajania · Tara Capital Partners

Firstly, in terms of growth next year, what would be the key drivers? Where do you see your growth? You said possibly above sector. What could that range be? Corporate growth has been a good driver, but do you see corporate growth sustaining or do you see retail growth picking up from these levels?

On the corporate side, you would have seen in our release the increase that we have done over the previous year. We do see this sustaining as there has been demand. Of course, we will have to temper it given the fallout of what we see in the geopolitical area, which hopefully should not be more than a couple of months going into this financial year. But we do see an opportunity in corporate across sectors, in electronics, food processing, auto, auto ancillaries, the renewable sector and the semiconductors. Also, it opens up the different opportunities which are now available from an acquisition financing point of view, including what was already there for project finance and supply chain. So we see the corporate sector, the emerging corporates and corporates holding up in the year ahead. On retail growth, our retail growth has certainly stepped up from where we were last year. We have seen a better step-up in the last 3 quarters across our wheels business as well as on the personal loan, business loan side. We've also seen consistent holding of demand on the mortgage book. We've been about 53%, 54% in the retail and the balance coming out of wholesale.

Nitin Aggarwal · Motilal Oswal

On the deposits - how do you look at the deposit market share? We have done very well in this quarter but the system has also seen a sharp pickup. How do you kind of look at the market share that HDFC Bank has been able to garner this quarter in context of system number? And any color on what has driven this huge surge in the business numbers over the last fortnight?

If you look at the quarter, the INR 2.45 lakh crores of deposits that came in, typically the market accretes more than half, close to half or slightly above half of what the year accretes in the last quarter. In this year, it has been more squeezed towards the last month of the quarter rather than the full quarter because January was still tight all across. From later part of February to March, it has been quite easy and liquid. There's a market tailwind. System growth was reported about 11.5% or so. When you look at the composition between retail and wholesale, there is some level of wholesale deposits that come in March quarter naturally. The average of retail versus wholesale is about a percentage point or 2 different in this quarter - 82%, 83% against 84%. Retail continues to power and stays ahead of the 80% mark. The core retail is also faster and almost close to the total despite good power coming from wholesale. We feel quite enthused by the relationship managers gathering and engaging.

Kunal Shah · Citigroup

On LCR at 114% - we are below 115%. How would we look at LCR because now LDR is not in focus, but we would want to manage LCR. What range would we want to sustain the LCR?

Kunal, in the past, we have mentioned that our endeavor for LCR is to be between 110% and 120%. We are somewhere in the middle. Last quarter, I think we were about 116%. Now we are 114%. So thereabouts, that's the kind of range at which we intend to operate, to be in the middle. Sometimes it goes higher, sometimes it comes below, but somewhere in the middle is where we endeavor.

Pranav · Bernstein

Follow-up - hypothetically if borrowings would decline by 75%, your borrowings just come off to 6% or 7% of liabilities today, do you think NIM will improve very significantly? And on the metric question - I heard you focus more on returns than just NIM. So is some version of PPOP the metric? What would be the best metric then?

Yes. If all else remaining same, that means no other factors play in, borrowing percentage coming down will change the NIM trajectory upwards and all else on the other side also remaining same will boost the returns. ROA is what we should focus on. PPOP is an intermediate. You take higher risk and take it in the top line, you give it away in the credit cost below the PPOP. But PPOP doesn't determine what returns you can get. So we focus on the return on asset.

Seshadri Sen · Emkay Global

I was hearing Sashi about the investments made in the last 5 years. Are we now entering a cycle where the cost-to-income ratio has peaked and we can expect significant benefits to come through? On the opex side, is there a possibility that overall opex could slow down because a large part of these investments are done? Or is this an ongoing process with not too many levers?

If you look at the cost growth we have, we have seen that at a level almost at 6.5%, 7% or so is the full year. Quarter-to-quarter variations happen, but full year 6.5%, 7% rate of growth is lower than the top line growth, and you're seeing that benefit coming in. Cost-to-income is a relative ratio - even when the top line moves faster, you get that relative ratio. But more important is also to look at cost to assets. Cost to assets is at about 1.9 or so. We do think that the cost to asset at 1.9 is best-in-class. However, we do see that there is an opportunity space even in that aspect of it due to various technology implementations. Sashi added: if we just focus on the investments that we have made in technology and implement them across the organization, you should see operating leverage kicking in and enhancing your ROAs.

Seshadri Sen · Emkay Global

On retail loan growth - you've done well in overall loan growth, but retail still in single digits. What would be the levers to accelerate retail loan growth - which products, channels, harvesting cross-sell from existing customer base? Should we expect forward momentum in FY27 - back-ended or front-ended?

We have seen good traction across our products in wheels, personal loans as well as mortgages space over the last 3 quarters sequentially. On mortgages, we were doing mortgages earlier out of about 6,800 locations. We are now covering mortgages from more than 7,800 locations, closer to 8,000. We've got our digital channels working very well, with higher utilization of our 10-second loans, both in express loans, auto loans and personal loans. We've also seen more addition to the customer acquisition base and the foray in salary accounts. These salary accounts create the base for better cross-sell and penetration of our retail products. We are the leading bank in salary accounts. We have seen our disbursals go up quarter-on-quarter. On mortgages, we would be amongst the top two with hardly a gap in quarterly disbursements. In auto loans we have grown well and are market leaders. Gold loan business launched last year has built a good quality book. On SME - we are number one in 15 out of 28 states, and top two in 25 out of 28 states. Business banking grew about 20% YoY and will continue in the range of 18% to 20%, 21%.

Abhishek Murarka · HSBC

On the mix - lower life sales? Is that temporary, or some change in process, or just coincidental?

Nothing really to read into it. It's a question of our RMs are engaged as much as they are engaged today versus they were engaged last year. It's a function of what the preference is. That is why you saw even the product preferences somewhat different. So it's a question of how we get on more customers and spread it around to be much more penetrated. We still have only a mid-single-digit penetration in our base. The opportunity space continues to be there. Enormous opportunity space continues to be there.

▸ Prepared remarks (4 blocks)
Thank you, Srini, and thank you all. Good afternoon to you, an d welcome to the full year FY 26 annual results call. Let me dive straig ht into the key aspects of FY 26 performance. We had estimated the system credit growth to be around <strong>10.5%</strong> to 11.5%. We did 12%, up from 5.5% last year. As you can see, there is positive momentum as we had expected. Deposit growth rate at 14.4% continues to grow faster than the credit growth, which is what we've always been doing. The growth rate is better than the system growth rate yet again. Net income growth clocked at 11%, similar to the last financial year, whilst EPS growth of 10% versus 3% last year. The yield on assets had a faster transmission as against deposits on a full year basis, leading to a NIM drop. Despite the drop in NIMs, the return on assets continue to be stable at 1.9% due to cost efficiencies with cost -to-income declining from 40.5% to 39.5% on a core basis and focus on quality growth reflecting in lower credit costs. I would like to remind the sizable investments we made over the last 5 to 6 years, which will bear fruit in the coming years. These investments were despite we witnessing significant events such as COVID, a complex and one of the largest mergers in corporate history. The distribution nearly doubled to 9,700 branches. The number of customers nearly doubled to 100 million customers. Our tech investments more than quadrupled to around $1 billion. The merger with mortgage company, HDFC Limited too is an investment for the future. The bank navigated the same in a stable manner over the last 3 years despite changing economic outlook and regulatory stance. The above is going to provide a huge operating leverage in the future. Sometimes all of us have short memories and forget the core business foundation, which remains our moat and strength. Customers at 100 million , we continue to acquire about 6 million to 8 million customers a year. This will be the funnel for future growth. 22% of our customers are actually 30 years of age, 42% are less than 40 years of age. This enables us an opportunity to engage through their l ife cycle, which would be the future engine of growth. We continue to be market leaders in our core franchise offerings such as cash managemen t. In the Capital Markets segment, we continue to hold about 35% to 40% of the account settlements. In the bankers to issue we hold about 40% to 50% of the escrow settlement. In the trade part of the business, almost 18% to 20% of the country exports goes through us. In the imports, 13% to 15% of the country's exports go through us. In the cards, merchant acquiring, almost about 35% to 36% of the acquiring comes through the bank. On the issuance of credit cards, 21% to 22% of the issuances of the system is from us. In the spend s, almost 26% to 28% of the card spends in the market is through our cards. We are a dominant salary relationship bank in the private sector. We are amongst the top 2 MSME banks in the country, so as in the mortgages, we are among the top 2 mortgage bank in the country. In the wheels business, whether it's auto or transportation, we're the top wheels bank in the country. The above, despite intense competitive environment, reflects the excellence and execution capability of the bank. Our financial parameters reflect strength and resilience of the bank. We have a strong capital position at 19.7%. Our asset quality is extreme ly healthy at 1.15% gross NPAs. This has been tested across 3 decades of business cycles. The bank has created a large provisioning buffer of almost 125 basis points to absorb any shocks in the future, where this is obviously contingent upon any future events that may occur in the future, we don't have any stress in our portfolio as we speak. Our focus is on profitability while pursuing growth opportunities. The loan deposit ratio is not a constraint. The regulator has come out and talked about it. We have demonstrated our ability to gain market share on deposits every year, almost around 30 to 50 basis points over the last 5 years. Hence, it's no longer a binding constraint. We have been building granular and sustainable deposit franchise, which is reflected thus. In the less than 3 crores retail liabilities, we have moved up from 31% of the net total accretion to about 47% of the total net deposit accretion for the year. This reflects the focus on granular and sustainable deposits. Having said that, the bank will continue to improve its quality of deposit franchise over the years to come. The bank witnessed an unprecedented event recently, but its strength and resilience was seen with stable and strong deposit flows. I would like to take this opportunity to thank the Government of India, the Reserve Bank of India and SEBI for their unequivocal support during that period. However, the most important strength will be our leadership in the technology space.
Over the past few years, we have focused on strengthening the bank's long -term competitive position anchored heavily in our technology architecture to operate as a technology-first institution. A large share of our investment has gone towards improving the digital front end customer experience. We have been upgrading our interfaces, simplifying acquisition and service journeys, and modernizing our digital platforms. We launched in the year our new net -banking, mobile-banking platforms and also our payment platform, which we probably did about a couple of years ago, all of them are at a population scale. Today, our mobile app serves over <strong>60 million</strong> registered customer offerings. The USP of our build focuses on security. We have an OTP-less authentication. We have a lock, which is for enhanced security, and we have a full stack UPI-enabled wallet, which we call the Zapp account. A combination of the above will make it extremely secure and probably one of the most secure offerings in the country today. The efforts have increased digital adoption to 97% for payments and service transactions and 92% for acquisition journeys. Our goal remains simple ; offer customers a seamless, reliable, friction -free experience across all touch points. The next layer after the customer layer is the intelligence layer. This is principally to build an AI-ready engine. We have built a strong intelligence layer that brings automation and analytics to the core of our operations. By decoupling our front -end and back-end through a modern API gateway and orchestration layer, we now have a strong foundation for the emerging agent -driven AI model. AI is only as strong as its data. We have built a robust data foundation anchored by a customer level, enterprise -level, single source of truth from a customer perspective. We went live with our Lakehouse Architecture, a centralized scalable data lake, reusable, enriched data marts. While not always visible externally, this work is essential to our long-term scalability and AI aspirations. But the big story is how we've created in -house the unified AI platform, which is going to be the center that spans across the entire organization. It allows us to deploy AI agents quickly without building custom interfaces between systems. The platform brings together enterprise search, document extraction, voice-based agents, and a full AI development lifecycle. It supports multi -foundational and open models , and includes a unified evaluation model for strong governance, compliance and security. We have an independent unit in the risk team that adds a second -line safeguard. The key components include the Model Context Protocol , the Agentic Studio and Agentic Mesh. This will enable us to deploy AI agents to scale, placing us amongst the small group of Indian and global banks with such advanced in-house capabilities. We already have 5 use cases in production and 14 more in development, improving turnaround times, first-time right outcomes, and freeing mid-office and back-office capacity for customer-facing roles. The above leadership position will enable us to harness efficiencies across the organization and will be a key driver to enhance return on asset over the next 1, 2, 3 years. The guiding principle is return on assets, loan growth and deposit growth, and qua lity of the balance sheet from a risk standpoint. All of it should culminate in a consistent EPS growth. Let me also take on the subject matter relating to some of the matters that we witnessed during the quarter, including the resignation of the former part -time Chairman and the Dubai branch-related matter. I and the members of the Board did provide statemen ts post the 18 th March 2026 event. The Government of India, the Reserve Bank of India and SEBI came out with statements in favor of the bank. The legal review, which is what we had committed at the time when we went to the press, is in process. As and when this happens, we shall provide a summary of the same. The audited financial statements of the bank for the year ended March '26 carry notes, which are self-explanatory. On the Dubai branch -related matter, the same has been covered in the notes to accounts as well. There is also an NCDRC order, which came out on the 23 rd of March, which highlights that the complainants are not retail in nature or are not uninformed investors, and they had a clear intent to pursue high-yield, high-risk investment products. So we do not have anything incremental other than the above. So we would like to pause out here and probably take on questions from here. Thank you.
We had estimated the system credit growth to be around <strong>10.5%</strong> to 11.5%. We did 12%, up from 5.5% last year. Deposit growth rate at 14.4% continues to grow faster than the credit growth. Net income growth clocked at 11%, similar to the last financial year, whilst EPS growth of 10% versus 3% last year. The yield on assets had a faster transmission as against deposits on a full year basis, leading to a NIM drop. Despite the drop in NIMs, the return on assets continue to be stable at 1.9% due to cost efficiencies with cost -to-income declining from 40.5% to 39.5% on a core basis and focus on quality growth reflecting in lower credit costs. We have a strong capital position at 19.7%. Our asset quality is extreme ly healthy at 1.15% gross NPAs.
The bank has created a large provisioning buffer of almost <strong>125 basis points</strong> to absorb any shocks in the future. In the less than 3 crores retail liabilities, we have moved up from 31% of the net total accretion to about 47% of the total net deposit accretion for the year. The distribution nearly doubled to 9,700 branches. The number of customers nearly doubled to 100 million customers. Our tech investments more than quadrupled to around $1 billion.
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