Why HDFC Bank Shares Tanked Over 5% On July 20

India's top private lender HDFC Bank's shares declined as much as 5.13% to hit an intra-day low of Rs 777.50 apiece after its Q1 results missed Dalal street estimates.

Over the weekend, HDFC Bank posted a 5% year-on-year (YoY) rise in standalone net profit to Rs 19,060 crore for the quarter ended June (Q1FY27) aided by lower provisions and a nearly 7% surge in net interest income (NII).

“Despite some pick-up in loan growth to 15.5% y/y, HDFC Bank’s credit growth remained well below peers such as ICICI Bank and Axis Bank. NIM declined 13bps q/q, further widening the margin gap versus ICICI Bank, while asset quality remained broadly stable. HDFC Bank has been unable to close the post-merger gap with ICICI across key operating metrics, including NIM, loan growth and CASA ratio,” according to an Anand Rathi brokerage report. 

Given that CASA growth continues to lag loan growth, “we believe it will take longer for the bank to narrow the funding cost gap with ICICI.”

“Consequently, we do not expect loan growth or RoE to sustainably exceed 14% over the medium term. In addition, we see some uncertainty around the RBI extending the tenure of the current CEO, given the recent developments at the bank. Nevertheless, we maintain our BUY rating, supported by reasonable valuations and favourable sector tailwinds,” it said. 

In the year-ago period, the bank's net profit was boosted by a one-time gain from the sale of its stake in HDB Financial Services via an offer for sale (OFS) during the subsidiary's initial public offering (IPO). Meanwhile, HDFC Bank booked a gain of Rs 9,130 crore from the transaction in Q1FY26. 

Adjusted for the one-off gain, net profit rose nearly 10 per cent YoY. On a sequential basis, net profit declined around 1%.

The bank also reported a net interest income rise of 6.7% YoY to Rs 33,535 crore in Q1FY27 from Rs 31,438 crore a year earlier.

Also Read: Axis Bank Shares Shed 6% After Posting 23% YoY Surge In Q1 Profit

Meanwhile, other income declined 41% YoY to Rs 12,821 crore as against Rs 21,729 crore in the same quarter last year, including gains from the HDB Financial Services stake sale.

The bank's net interest margin (NIM) narrowed to 3.26% in Q1FY27 from 3.38% in the March quarter, its lowest level on record, as cost of funds remained the same but yield on assets declined by 1 bps. 

The bank's provisions and contingencies stood at Rs 3,060 crore during the quarter, as compared to Rs 2,609 crore in Q4FY26 and Rs 14,441 crore in the year-ago period.

Asset quality weakened marginally during the quarter. Gross non-performing assets (GNPAs) rose to 1.17% as of June 30, 2026, from 1.15% at the end of March, while net NPAs increased by 3 basis points sequentially to 0.41%.

Gross advances grew 15.4% YoY to Rs 30.61 trillion as of June 30, 2026. Advances under management rose 12.4% over the year, driven by 7.2% growth in retail loans and 18.7% growth in the small and mid-market enterprise segment.

The total deposits rose 14.7% YoY to Rs 31.71 trillion at the end of June. CASA deposits rose 9.4% to Rs 7.01 trillion, comprising Rs 3.76 trillion of savings account deposits and Rs 3.25 trillion of current account deposits. Time deposits grew 17.4% to Rs 21.46 trillion, while the CASA ratio stood at 32.3%.

As of 11:07 AM, the shares of HDFC Bank were trading 4.50 % lower at Rs 782.70 apiece.