CONNECT WITH US
Fintech

Fintech

HDFC Bank margins near bottom, but expensive FCNR(B) deposits could delay recovery

ET BFSI Fintech logo

Published on

Add as a preferred source on Google
HDFC Bank margins near bottom, but expensive FCNR(B) deposits could delay recovery

HDFC Bank margins near bottom, but expensive FCNR(B) deposits could delay recovery

The bank expects its NIM trajectory to remain neutral to positive in Q3FY27 and improve thereafter, supported by the repricing of floating rate loans and a gradual shift towards better yielding retail and micro, small and medium enterprise (MSME) advances.

HDFC Bank’s NIM fell 10 bps sequentially to 3.16% in Q2FY27, with FCNR(B) costs likely to temper recovery. FCNR(B) mobilisation boosted deposit growth, but CASA deposits rose 11% year on year against 23% growth in term deposits. Retail disbursements exceeded Rs 900 billion, while business banking grew 28% year on year. Gross NPA fell to 1.11%. The brokerage retained BUY, cut its target price to Rs 950 from Rs 975 and expects RoA of 1.8% to 1.9% over FY27-29.

HDFC Bank ’s net interest margin ( NIM ) may have bottomed out in the September quarter, but the cost of foreign currency non-resident (FCNR(B)) deposits could temper the pace of recovery in the coming quarters. 16% in Q2FY27, despite slower corporate growth, as its cost of funds remained flat. The impact of a 25 basis points rate hike is expected to begin reflecting in margins from December 2026, although the full quarter cost of FCNR(B) deposits will partly offset the benefit. The bank expects its NIM trajectory to remain neutral to positive in Q3FY27 and improve thereafter, supported by the repricing of floating rate loans and a gradual shift towards better yielding retail and micro, small and medium enterprise (MSME) advances.


Source link
Related Topics:Fintech

Disclaimer

We strive to uphold the highest ethical standards in all of our reporting and coverage. We TheMorningPulse.fyi want to be transparent with our readers about any potential conflicts of interest that may arise in our work. It's possible that some of the investors we feature may have connections to other businesses, including competitors or companies we write about. However, we want to assure our readers that this will not have any impact on the integrity or impartiality of our reporting. We are committed to delivering accurate, unbiased news and information to our audience, and we will continue to uphold our ethics and principles in all of our work. Thank you for your trust and support.