HDBFS Q2 FY26 earnings call.
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What the record says.
HDB Financial Services reported Q2 FY26 PAT of ₹581 crore, up from ₹568 crore in Q1, with gross loan book growth of 13% YoY to ₹1,11,149 crore. NIM improved to 7.9% (vs 7.5% YoY) and cost-to-income ratio declined to 40.7%. Asset quality weakened with gross stage 3 rising to 2.81% (from 2.56% QoQ), driven by CV segment stress from monsoon-related vehicle idling. Management expects credit cost to normalize from Q3 towards the 2.2% medium-term target. Growth outlook is cautiously optimistic with festive season pickup, but near-term loan growth remains moderate at 13% YoY. Key risk: sustained CV asset quality pressure if economic recovery falters.
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Guidance to track
- Management expects credit cost to normalize from Q3 onwards towards the 2.2% medium-term target, down from current 2.7%.
- Over a 3-5 year horizon, HDB targets 18-20% CAGR in loan book growth, with potential to adjust higher if GDP growth supports.
- Management aims to maintain NIM in the 7.9-8% range, balancing yield and cost of funds pressures.
- Management targets cost-to-assets ratio between 3.6% and 3.7% as it continues to invest and grow.
Risks flagged
- Commercial vehicle segment stress from monsoon idling may persist if economic recovery or infrastructure spending does not pick up.
- Credit cost at 2.7% remains above the 2.2% medium-term target; normalization may take longer if asset quality pressures continue.
- Analyst raised concern about competition; management acknowledged but did not provide specific mitigation, suggesting potential margin pressure.
- Analyst questioned if climate change is factored into provisioning; management said it is captured in PD/LGD models, but severity may increase.
Key quotes
- Our insights suggest that this time in certain markets that went as high as 30-35% [vehicle idling].
- We look to operate within a 2.2% plus minus in terms of overall credit cost and that is where we believe the ideal range for our book is.
- We have already started seeing good movement in retail in the first few days of October which should reflect in the months ahead.
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