HDFC Bank Q1 Earnings Call Highlights

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Deposit growth stayed relatively strong for a Q1 period, with HDFC Bank gaining market share and improving branch productivity, though management said the CASA ratio remains below pre-merger levels and time deposits are growing faster than low-cost funds.

Loan growth was broad-based across wholesale, MSME, and retail segments, with corporate loans up about 18% and business banking up 22.3%, while management said it expects to keep pushing advances as credit demand remains healthy.

Margins remain under pressure from funding costs and a higher borrowing mix, but the bank said cost-of-funds improvement and a better loan mix should support longer-term recovery, alongside ongoing investments in technology, AI, and customer service.

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HDFC Bank (NYSE:HDB) management told investors that the lender entered the first quarter of fiscal 2027 with improving business momentum, stronger branch productivity and continued market-share gains in deposits, while also acknowledging ongoing pressure from funding costs and a shifting deposit mix.

Chief Executive Officer Sashi Jagdishan opened the earnings call by noting that the bank had navigated "certain challenges over the last four months" while keeping its focus on customer needs and franchise expansion. He thanked employees, the board and Keki Mistry, who served as interim chairman, and welcomed newly appointed Chairman Rajiv Kumar. Jagdishan said Kumar's appointment brought "a sense of stability" and reduced uncertainty for the institution.

Jagdishan said deposit growth in the quarter remained "relatively better than the historical Q1 trends," with HDFC Bank continuing to gain market share on both an incremental and stock basis. He also said branch productivity continued to improve as the bank realized benefits from investments made over the past five to six years.

Chief Financial Officer Srinivasan Vaidyanathan said the bank has more than 100 million customer relationships and is focused on improving "unit economics" by adding more accounts while keeping costs under control. He said household deposit growth in India remains among the lowest across deposit categories, which makes customer acquisition and distribution reach critical.

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Management also discussed the bank's current account and savings account, or CASA, trajectory. Jagdishan said the bank's objective is to move closer to pre-merger CASA levels, noting levels around 38% after the merger and 40% before that. However, he said time deposit growth has been higher than low-cost funds growth in recent years, contributing to a lower CASA ratio.

Vaidyanathan added that time deposits also remain an opportunity, noting that only 14% of the bank's customers currently have time deposits with HDFC Bank.

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Asked whether margins had bottomed, Vaidyanathan said the bank does not manage margins on a quarter-to-quarter basis and that a full-year view is more appropriate. He identified cost of funds as the largest opportunity for margin improvement, but cautioned that changes would not happen quickly.

Vaidyanathan said non-retail deposit costs remain elevated, while retail deposit costs have been relatively steady. He also said the bank's borrowing mix remains around 11%, compared with an industry level of roughly 5% to 6%, and that maturities and balance-sheet growth should help reduce that proportion over time.

On the asset side, Vaidyanathan said the mix of loans will also matter for longer-term margins. He noted that retail loans make up about 52% of the bank's loan mix, while management has historically viewed roughly 60% as a level that better mirrors the consumption component of India's economy.

Management said cost of funds was broadly flat sequentially and down about 40 basis points year over year.