HDFC Bank faces growth and margin concerns after HDFC Ltd merger
The bank's stock has underperformed the Nifty 50 due to integration challenges and leadership transitions, according to Mint.
HDFC Bank has faced pressure on its net interest margin (NIM) and growth rates following its 2023 merger with HDFC Ltd, according to a report by Mint. The stock has underperformed the Nifty 50 over the past year as the bank manages the integration of the two entities.
The merger created a funding mismatch because HDFC Ltd's home loan portfolio relied on wholesale sources rather than the customer deposits that fund HDFC Bank's lending. This required the bank to prioritise rebalancing its cash reserves and deposits over rapid expansion. The bank also recently underwent a leadership transition, with Anup Bagchi taking over as CEO and managing director from Sashidhar Jagdishan on 27 October.
Despite these issues, the bank maintains a strong position with 9,706 branches and 20,881 ATMs across 4,177 cities and towns as of 30 September 2026. In Q2FY26, the gross non-performing asset (NPA) ratio was 1.11%, while the net NPA stood at 0.37% of total advances.
Management stated that the standard of deposit growth is getting better, which is expected to lower funding costs over time. The bank also noted that branch-level productivity is increasing and expects to see returns from subsidiary investments made over the last five to six years.
Looking ahead, HDFC Bank aims to expand its customer base and focus on granular deposit mobilisation. However, the bank faces intense competition from various banks and non-banking financial companies (NBFCs) in the Indian financial sector.