HDFC Bank Q3 Results: Profit Jumps 11.5% to ₹18,654 Crore

HDFC Bank, India's largest private sector lender, announced its financial results for the third quarter of fiscal year 2026 on Saturday, January 17. The bank reported an 11.5% year-on-year increase in standalone net profit, reaching ₹18,654 crore. This steady growth was driven by consistent core earnings, healthy expansion in deposits, and stable asset quality, though the bank's net interest margins faced some pressure. The results underscore the bank's resilience and operational discipline in a competitive market environment.

Profitability and Core Income Growth

The bank's profit after tax for the quarter ending December 31, 2025, stood at ₹18,654 crore, up from ₹16,736 crore in the corresponding quarter of the previous year. This performance was supported by a modest rise in its core income. Net Interest Income (NII), the difference between interest earned and interest expended, grew by 6.4% to ₹32,620 crore from ₹30,650 crore a year ago. However, the bank's margins remained a key focus area for analysts. The core Net Interest Margin (NIM) was reported at 3.35% on total assets and 3.51% on interest-earning assets, indicating stability but also highlighting the challenges of a competitive lending environment. The bank's total net revenue, which includes other income, increased by 8.9% to ₹45,870 crore for the quarter.

Asset Quality Remains a Key Strength

A significant highlight of the quarter was the continued strength and stability of HDFC Bank's asset quality. The bank's Gross Non-Performing Assets (GNPA) stood at ₹35,179 crore as of December 31, 2025, a reduction from ₹36,019 crore a year earlier. This translated into an improved GNPA ratio of 1.24%, down from 1.42% in the same period last year. The Net Non-Performing Assets (NNPA) also showed improvement, with the NNPA ratio easing to 0.42% from 0.46% year-on-year. This consistent improvement in asset quality metrics reinforces confidence in the bank's prudent underwriting and risk management practices.

Disciplined Operations and Lower Provisions

HDFC Bank maintained its reputation for operational efficiency. Operating expenses for the quarter were ₹18,770 crore. After excluding an estimated ₹800 crore impact from employee benefits under the New Labour Code, the core operating cost was ₹17,970 crore. This led to a core cost-to-income ratio of 39.2%, showcasing the bank's ability to manage expenses effectively while expanding its operations. Provisions and contingencies for the quarter amounted to ₹2,840 crore, a decrease of over 10% from the previous year. This figure was aided by a release of contingent provisions worth ₹1,040 crore, which was linked to a large borrower group meeting specific repayment conditions.

Healthy Growth in Deposits and Advances

The bank's balance sheet continued its steady expansion, with the total size reaching ₹40.89 lakh crore as of December 31, 2025, up from ₹37.59 lakh crore a year earlier. Deposit mobilization remained robust, with total deposits growing 11.6% year-on-year to ₹28.6 lakh crore. Low-cost Current Account and Savings Account (CASA) deposits saw a 10.1% increase, reaching ₹9.61 lakh crore and constituting 33.6% of total deposits. On the lending side, gross advances grew by 11.9% year-on-year to ₹28.45 lakh crore. This growth was well-diversified, with retail loans rising by 6.9%, small and mid-market enterprise loans growing by 17.2%, and corporate loans increasing by 10.3%.

HDFC Bank Q3 FY26 Performance at a Glance

Strong Capital Position

HDFC Bank's capital adequacy remains well above regulatory requirements, providing a strong buffer for future growth. As of December 31, 2025, the total Capital Adequacy Ratio (CAR) under Basel III norms was 19.9%, significantly higher than the regulatory mandate of 11.9%. The Tier-1 capital adequacy ratio was also robust at 17.8%, with the Common Equity Tier-1 (CET1) ratio at 17.4%. This strong capital base positions the bank favorably to navigate economic uncertainties and capitalize on lending opportunities.

Market Perspective: Steady but Unsurprising

Ahead of the results announcement, HDFC Bank's shares closed at ₹930.55 on the NSE, up 0.55%. The stock has been a solid performer, gaining 13.7% over the past year and outperforming the benchmark Nifty 50 index, which returned less than 11% in the same period. The Q3 results, while strong, did not contain major positive surprises that could trigger a sharp rally. Market participants viewed the numbers as a confirmation of the bank's stability and fundamental strength, which was largely priced into the stock. The reaction was balanced, reflecting the perception of HDFC Bank as a reliable, long-term compounder rather than a short-term momentum play.

Outlook for Investors

The Q3 FY26 results reinforce HDFC Bank's status as a core holding for investors focused on stability and consistent, albeit moderate, growth. The key positive takeaways are the resilient asset quality and the steady expansion of the balance sheet. However, the pressure on net interest margins remains a critical factor to monitor. Going forward, investors will be closely watching for any acceleration in loan growth, trends in deposit mobilization costs, and the bank's ability to protect or improve its margins in a competitive landscape. The results confirm the bank's solid execution but also set the stage for a continued focus on operational efficiency to drive future earnings.