HDFC Bank has given its investors plenty to celebrate this quarter. In what many are calling a triple treat, the bank has announced a 1 to 1 bonus issue, declared a special interim dividend of Rs 5 per share before the bonus, and reported strong financial results for the quarter ending June 2025. Despite a slight dip in its stock price, investor sentiment remains upbeat as the bank continues to show resilience in a changing economic landscape.

The latest financials show a standalone net profit of Rs 18,155 crore for the quarter, marking a 12.2 percent increase from the same period last year. This growth comes despite a challenging environment where the Reserve Bank of India has been cutting interest rates to stimulate lending. As interest rates on loans fall faster than those on deposits, banks face pressure on their net interest margins. For HDFC Bank, the net interest margin stood at 3.35 percent of total assets, slightly down from 3.47 percent a year ago.

To put this in context, Axis Bank, a close competitor, also saw a drop in its margin to 3.8 percent from 4.05 percent a year ago. This suggests that the trend is sector-wide and not specific to HDFC Bank. Still, HDFC’s performance on other fronts gives investors reason to stay optimistic.

The bank’s total advances grew by nearly 6.7 percent year on year, reaching Rs 26.28 lakh crore in the first quarter of the financial year. Its asset quality remained stable, with the percentage of net non-performing assets to total advances at just 0.47 percent, up marginally from 0.39 percent a year earlier. This indicates prudent risk management and suggests that the bank is well-prepared to weather any economic headwinds.

One of the standout aspects of this quarter’s results was the extraordinary gain of nearly Rs 9,128 crore from the offer for sale of its subsidiary HDB Financial Services. To bolster its financial cushion, the bank made a floating provision of Rs 9,000 crore and an additional contingent provision of Rs 1,700 crore. These strategic moves led to a total provision figure of Rs 14,441.5 crore for the quarter, significantly higher than the Rs 2,602 crore reported in the corresponding quarter last year.

Such robust provisioning reflects HDFC Bank’s cautious approach in preparing for any potential rise in bad loans while maintaining a strong profit trajectory. Meanwhile, Axis Bank’s quarterly profit fell by 4 percent to Rs 5,806 crore, largely due to stricter recognition of non-performing assets which impacted its earnings by Rs 614 crore.

When it comes to return on assets, another key operational measure, HDFC Bank again outperformed. Its return on average assets, not annualized, was 0.48 percent in the June quarter. On an annualized basis, this figure translates to nearly 1.92 percent, higher than Axis Bank’s 1.47 percent for the same period.

Looking at market performance, HDFC Bank’s stock ended last Friday at Rs 1,957.4, only slightly lower than its 52-week high of Rs 2,027.4. This shows that despite some market volatility, investor confidence in the bank’s long-term prospects remains strong. The announcement of the bonus issue and dividend is likely to reinforce that optimism, especially at a time when the central bank is encouraging more lending through policy support.

Going forward, the bank’s wide branch network, consisting of over 9,400 locations across India, is expected to play a key role in expanding its reach and gathering low-cost deposits. These deposits are crucial for maintaining healthy margins as the competition for funds intensifies.

While HDFC Bank trades at a relatively high price-to-earnings ratio of over 20 based on projected earnings for the current financial year, it continues to command investor trust because of its consistent performance, strong governance, and prudent risk practices. On the other hand, Axis Bank trades at a lower P E of around 14, but the weaker quarterly numbers have subdued investor enthusiasm for now.

For long-term investors, the current developments offer important signals. Those considering an entry may wait for more attractive valuation levels, but the fundamentals of the bank continue to make it a reliable pick for a long-term portfolio.

 

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