HDFC Bank Limited reported a net profit of ₹18,653 crore for the third quarter of FY26, registering an 11% year-on-year increase while remaining flat sequentially. The result underscores the bank’s ability to maintain earnings momentum despite cost pressures and a relatively subdued operating profit trend during the quarter.

Net interest income (NII) rose to ₹32,615 crore, up 6% year-on-year and 3% quarter-on-quarter, supported by healthy loan growth and a sequential improvement in margins. Net interest margins improved to 3.35% from 3.27% in the previous quarter, indicating some relief on the funding cost front amid intense competition for deposits across the banking system.

Operating profit, however, declined 3% quarter-on-quarter to ₹27,096 crore, reflecting elevated operating expenses. Total operating expenses stood at ₹18,770 crore during the quarter. Excluding the impact of the new labour code, expenses were ₹17,970 crore, while the implementation of the labour code added an incremental pre-tax cost of around ₹800 crore. This cost headwind partially offset the benefits of higher income and remains a key factor influencing near-term profitability.

Provisions declined sharply by 19% quarter-on-quarter to ₹2,837 crore, providing earnings support. This reduction reflects stable asset quality trends and controlled credit costs, even as the bank continues to scale its balance sheet.

Asset quality metrics remained stable sequentially. Gross NPAs stood at 1.24% as of December 2025, unchanged from the previous quarter, while net NPAs were also steady at 0.42%. On an agri-adjusted basis, gross NPAs were at 0.97%, broadly stable compared to 0.99% in September 2025. On a year-on-year basis, asset quality showed improvement, with gross NPAs declining from 1.42% in December 2024. In absolute terms, gross NPAs increased 3% quarter-on-quarter to ₹35,178 crore, and net NPAs rose 5% to ₹11,981 crore, largely reflecting balance sheet expansion rather than stress slippages.

Other income emerged as a key positive during the quarter. Non-interest income stood at ₹13,250 crore, supported by diversified revenue streams. Fee and commission income rose to ₹9,230 crore from ₹8,180 crore a year ago, reflecting healthy underlying business activity. Forex and derivatives income remained stable at ₹1,430 crore. A notable highlight was the sharp jump in trading and mark-to-market gains to ₹930 crore from ₹70 crore in the year-ago period, which materially boosted overall other income. Miscellaneous income moderated slightly to ₹1,660 crore from ₹1,790 crore year-on-year.

On the balance sheet front, the bank continued to show steady expansion. Total balance sheet size stood at ₹40.89 lakh crore as of December 2025, up from ₹37.59 lakh crore a year ago, translating into a year-on-year growth of about 8.8%. Average deposits increased to ₹27.52 lakh crore, reflecting 12.2% year-on-year growth and 1.5% sequential growth. Average CASA deposits rose to ₹8.98 lakh crore, up nearly 10% year-on-year, with a quarter-on-quarter growth of 2.4%.

Total end-of-period deposits stood at ₹28.60 lakh crore, growing 11.6% year-on-year. CASA deposits increased 10.1% year-on-year, with savings account balances at ₹6.62 lakh crore and current account balances at ₹3.00 lakh crore. Time deposits rose 12.3% year-on-year to ₹18.99 lakh crore. The CASA ratio remained healthy at 33.6%, providing a relatively stable funding base.

Advances also maintained momentum. Average advances under management rose to ₹28.64 lakh crore, reflecting 9% year-on-year growth and 2.5% sequential growth. Gross advances stood at ₹28.45 lakh crore, up 11.9% year-on-year. Within the loan mix, retail loans grew 6.9%, SME loans expanded a strong 17.2%, while corporate and wholesale loans increased 10.3%. Overseas advances remained modest at 1.7% of total advances. Additional details are available in the bank’s official quarterly disclosure, accessible through its investor communication platform.

Market Impact on India

HDFC Bank’s results reinforce confidence in the stability of India’s private banking system. Consistent asset quality and deposit growth support broader financial system resilience, especially at a time when credit demand remains healthy but competitive pressures persist.

Sector Impact

For the banking sector, the results highlight a trend of margin stabilisation alongside elevated operating costs. Banks with strong deposit franchises and diversified income streams appear better positioned to absorb regulatory and cost-related headwinds.

Bull vs Bear Scenario

The bullish view centres on improving margins, controlled credit costs, and steady loan growth across segments, particularly SMEs.

The bearish view focuses on elevated operating expenses and the potential for slower profit growth if cost pressures persist or deposit competition intensifies.

Risk Section

Key risks include sustained cost inflation, potential stress in specific borrower segments, and margin pressure if funding costs rise again. Any slowdown in credit demand or adverse macroeconomic developments could also impact growth trajectories.

Overall, HDFC Bank’s Q3 FY26 performance reflects operational stability, with strengths in asset quality, margins and balance sheet growth balancing near-term cost pressures.