HDFC Bank: net profit grows, but net interest income in the reported quarter fell 4.3%

HDFC Bank reported results for the first quarter of 2026: net profit rose 18.4% year on year to 192,447.1 million INR, but net interest income fell 4.3% to 816,818.9 million INR. With a P/E of 15.0 and a portal model upside of about 7%, the shares look rather attractive.

Key takeaways

— Net profit rose 18.4% year on year to 192,447.1 million INR despite lower net interest income

— Net interest income in Q1 2026 fell 4.3% year on year to 816,818.9 million INR

— Trailing twelve months net profit was 704,793.4 million INR and net interest income was 1,925,700.0 million INR

— Return on equity for the last twelve months is 12.4%, moderately above the cost of capital

— Dividend yield for the trailing twelve months is 1.89%, below the key rate but in line with the payment history

— On the portal's model, the shares have about 7% upside to fair value

— In the next report, the key will be the recovery of net interest income and margin dynamics

Attractiveness

Key figures, INR bn

Net profit rose 18.4% year on year to 192,447.1 million INR despite lower net interest income

In Q1 2026, HDFC Bank posted net profit of 192,447.1 million INR, up 18.4% from the same period last year. Profit growth comes despite lower net interest income, pointing to improved operating efficiency or higher non-interest income.

Over the trailing twelve months, net profit was 704,793.4 million INR, confirming the bank's resilience on an annual basis. Quarterly dynamics, however, show the bank offsetting pressure on interest margin with other items.

Net interest income in Q1 2026 fell 4.3% year on year to 816,818.9 million INR

Net interest income (NII) for Q1 2026 was 816,818.9 million INR, down 4.3% year on year. The decline reflects pressure on net interest margin, possibly due to higher funding costs or changes in the loan mix.

In the previous quarter (Q4 2026), NII was negative (-114,611.5 million INR), indicating volatility in this metric. Over the trailing twelve months, NII reached 1,925,700.0 million INR, showing the significant scale of the business, but dynamics remain unstable.

Trailing twelve months net profit was 704,793.4 million INR and net interest income was 1,925,700.0 million INR

Over the trailing twelve months, HDFC Bank earned 704,793.4 million INR in net profit and 1,925,700.0 million INR in net interest income. These figures reflect the scale of the business and its ability to generate profit despite quarterly fluctuations.

The ratio of net profit to net interest income for the LTM is about 36.6%, indicating high operating efficiency. However, for assessing dynamics, quarterly figures are more important, and they show a mixed picture.

Return on equity for the last twelve months is 12.4%, moderately above the cost of capital

Return on equity (ROE) for the trailing twelve months was 12.4%. This is a moderate level, likely above the bank's cost of equity, providing a basis for value creation.

With a P/E of 15.0 and ROE of 12.4%, the shares are priced by the market at a P/B of about 1.86 (calculated). This is consistent with a bank with stable profitability but does not imply a significant growth premium.

Dividend yield for the trailing twelve months is 1.89%, below the key rate but in line with the payment history

Over the trailing twelve months, HDFC Bank paid dividends providing a yield of 1.89% at the current price. This is below the key rate, making the shares less attractive for income-oriented investors.

Nevertheless, the bank maintains dividend payments, confirming its financial stability. In the future, the size of dividends will depend on profitability and bank policy, but the current yield is not the main reason to buy.

On the portal's model, the shares have about 7% upside to fair value

According to the portal's model, based on capitalizing annual earnings to market cap, the fair value of HDFC Bank shares is about 7% above the current price. This is a moderate upside, not implying significant undervaluation.

With a P/E of 15.0 and ROE of 12.4%, the shares look fairly valued with a small upside. A change in the verdict would require either faster net profit growth or a lower market price.

In the next report, the key will be the recovery of net interest income and margin dynamics

After a 4.3% decline in NII in Q1 2026, investors will watch whether the bank can restore growth in interest income. The volatility in NII in previous quarters (including a negative value in Q4 2026) underscores the importance of this metric.

If NII stabilizes and starts growing, it could support the shares. Otherwise, even with net profit growth driven by other factors, margin pressure could limit the upside.

Valuation on the latest reported figures

Bottom line

HDFC Bank showed solid net profit growth of 18.4% in Q1 2026, but this came against lower net interest income. Over the trailing twelve months, the bank earned 704,793.4 million INR in net profit, confirming its resilience. However, the key question for holders is whether the bank can restore growth in interest income, given the volatility of recent quarters. At a current P/E of 15.0 and about 7% upside on the portal's model, the shares look rather attractive, but without a clear catalyst for acceleration.