Summary
HDFC Bank Limited - Q3 FY 2026 Earnings Call Summary Saturday, January 17, 2026, 6:15 PM IST
Event Participants
Executives 4 Bhavin Lakhpatwala (Senior Executive VP, Finance), Kaizad Bharucha (Deputy Managing Director), Sashidhar Jagdishan (MD & CEO), Srinivasan Vaidyanathan (CFO)
Analysts 6 Abhishek Murarka (HSBC), Chintan (Autonomous), Jayant Kharote (Axis Capital), Kunal Shah (Citigroup), Mahrukh Adajania (N/A), Nitin Aggarwal (Motilal Oswal), Prakhar Sharma (Jefferies India)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Deposits (Market Share) | ~11% | Focused on rate discipline and granular retail; individual retail segments saw solid double-digit growth. |
| Advances (Growth Outlook) | +11% (approx) | Current growth in line with system; guided to outpace system growth by 200 bps in FY27. |
| Net Interest Margin (NIM) | ~3.4% | Remained stable/under pressure; management expects improvement from lower cost of funds and lag in TD repricing. |
| Cost of Funds | -10 to -11 bps | Sequential decline driven by rate discipline and lag effects of previous time deposit repricing. |
| GNPA (Ex-Agri Slippages) | 24 bps | Improvement from 26 bps YoY; credit quality remains “pristine” across most segments. |
| Credit Cost (Net) | ~37 bps | Calculated net of recoveries; gross credit cost remains around 55 bps due to write-off velocity. |
| LCR | 116% | Management expects no material impact from upcoming regulatory guideline changes in April 2026. |
| Branch Productivity | ₹305 crores | Average deposits per branch, up from ₹237 crores in 2023 despite rapid network expansion. |
Geographic & Segment Commentary
- Retail Assets: Strong focus on “relationship-led” lending (mortgages/auto) rather than price-led. Management noted that 80% of auto loans are self-funded by the customer’s own liability accounts.
- Agri Portfolio: Faced a one-time ₹500 crore (5 billion) provision requirement following a regulatory inspection regarding “scale of finance” compliance. Management confirmed this is now fully subsumed in Q3 results.
- Commercial & Wholesale: Wholesale growth saw a resurgence this quarter. MSME remains a key strategic area due to the bank’s expanded geographic coverage and product suite.
Company-Specific & Strategic Commentary
- CD Ratio Glide Path: Management reiterated a commitment to lowering the Loan-to-Deposit Ratio (LDR) to the 85%-90% range by FY27. While no regulatory mandate exists, the bank views this as essential for sustainable profitability.
- Branch Strategy: The bank is recalibrating its expansion after opening ~4,800 branches in 5 years. Currently, 43% of branches are “young” (under 5 years), with those in the 5-10 year vintage typically seeing a 3x scale-up in productivity.
- Card Strategy Pivot: Moving focus from “revolving receivables” to “transactors.” 20-25% of total deposit momentum is now driven by card-linked customers, who maintain 5.5x more balances than non-card holders.
- Labor Code Provisioning: Recognized a ~₹800 crore (8 billion) estimated impact based on actuarial valuations of the upcoming new labor code. This is a high-side estimate pending final government rule-making.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Credit Growth | System + 200 bps (FY27) | Based on an assumed system growth of 12-13%; driven by MSME and retail distribution. |
| LDR (Loan-to-Deposit) | 90% to 95% (FY26) | Target range for the end of next fiscal year as the bank moves toward long-term levels of 85-90%. |
| Branch Additions | ~500-700 (Near-term) | Moderate pace (5-7% growth) to allow the recent massive cohort of 4,800 branches to mature. |
Risks & Constraints
| Risk | Context |
|---|---|
| Irrational Pricing | Management flagged “irrational pricing” by competitors in the home loan and auto segments, though they refuse to participate in price wars. |
| Liquidity Volatility | Recent availability was impacted by OMOs and FX swaps; stabilization is expected post-trade deal cycles. |
| Agri Compliance | Future calibrations are needed regarding “scale of finance” to ensure agri loans aren’t classified as non-agri by regulators. |
Q&A Highlights
LDR and Deposit Growth
- Question: How can the LDR drop so sharply to 90% by FY27 if deposit growth remains challenging? (Chintan, Autonomous)
- Answer: Growth will be faster than the system. The bank’s engine is reopening after FY25 containment. The 85-90% range is a medium-term target that will happen naturally as young branches mature (Sashidhar Jagdishan).
Agri Regulatory Impact
- Question: Have other banks’ agri provision issues affected HDFC Bank? (Mahrukh Adajania)
- Answer: A ₹500 crore provision was taken this quarter following inspection. This relates to “scale of finance” (loan size vs farm requirement). Future lending will be recalibrated to ensure compliance (Srinivasan Vaidyanathan).
Branch Productivity
- Question: Is the current branch expansion sufficient to fund loan growth? (Nitin Aggarwal, Motilal Oswal)
- Answer: New branches (last 5 years) already contribute >20% of incremental deposits. As 1,300+ branches enter the 5-year vintage “pivoting point,” deposit accretion will accelerate significantly (Srinivasan Vaidyanathan).
Credit Card Behavior
- Question: Why are card receivables flat despite high spends? (Abhishek Murarka, HSBC)
- Answer: The bank is targeting higher-end transactors rather than revolvers. Revolver rates are 2/3 of 2020 levels. Cards are now utilized as a tool for liability (deposit) gathering rather than just interest income (Sashidhar Jagdishan).
Key Takeaway
HDFC Bank reported a quarter characterized by stable credit quality and a strategic pivot toward relationship-led growth over aggressive pricing. The bank successfully navigated a one-time ₹500 crore regulatory provision in the agri segment while maintaining a “pristine” GNPA of 24 bps in its core book. Strategically, the bank is focusing on sweating its massive recent branch expansion, with 4,800 young branches poised to enter high-productivity cycles. Management has signaled a clear shift from the post-merger “containment” phase to an “opening up” phase, guiding for loan growth to outpace the system by 200 bps in FY27. While NIMs remain a point of investor focus, the 11 bps reduction in cost of funds and the discipline in deposit pricing suggest a roadmap for margin recovery. The bank remains committed to a downward LDR glide path toward 85-90%, supported by granular retail deposit growth and a evolving card strategy that prioritizes total customer value over revolving credit. HDFC Bank enters FY27 positioned to leverage its expanded distribution network for accelerated market share gains in a stabilizing liquidity environment.
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