HDFC Bank for the past near 20 years has been one of the outperforming banking stocks in the ecosystem.
Image: Shailesh Andrade / Reuters
The board of HDFC Bank, India’s largest private sector lender, has on Saturday approved a bonus share issue—for the first time ever—in a 1:1 ratio, while announcing its June-ended Q1FY26 earnings data. This is seen as a move to boost retail investor and shareholders’ confidence in the bank’s stock, particularly considering it has remained sluggish over the past year. HDFC Bank will now allot one share, at no additional cost, to investors for every share they hold as on the record date set at August 27, 2025.
For the past near 20 years, HDFC Bank has been one of the outperforming banking stocks in the ecosystem. But even with change in the top leadership—Sashidhar Jagdishan took charge as CEO after veteran Managing Director and CEO Aditya Puri retired—and post the merger of the bank with HDFC, the stock was languishing and in a consolidation phase over the past 24 months.
In 2025, HDFC Bank shares have been hovering near their all-time high of Rs 2,027, having risen just 9.72 percent this year and near 17 percent in the past two years. Prior to the Q1 earnings and bonus shares announcement, the stock had closed on Friday at Rs 1,957.4 on the National Stock Exchange (NSE).
“Expectations from the merger and the new top-deck leadership could not bring fresh energy into the stock, which the market expected and investors were disappointment. The bonus announcement should help boost retail interest in the stock,” Kranthi Bathini, director of equity strategy at WealthMills Securities told Forbes India.
HDFC Bank’s Chief Financial Officer Srinivasan Vaidyanathan however has clarified that the issuance of bonus shares is “not expected” to be an annual exercise. “We see it as an opportunity for retail shareholders,” he said.
The bank also announced a special interim dividend of Rs 5 per equity share of Re 1 each fully paid up (ie 500 percent), for FY2025-26. HDFC Bank reported an EPS of Rs 23.7 for the June-ended quarter.
In terms of corporate action, HDFC Bank had announced two stock splits, one in 2011 and then in 2019; one share of Rs 10 into five shares of Rs 2, and subsequently that one share of Rs 2 into two shares of Re 1 each.
HDFC Bank will be the 148th stock on the Bombay Stock Exchange (BSE) to declare bonus shares in 2025, so far.
Also read: Credit growth from banks likely to pick up late FY26
Q1 earnings: Income, margins sluggish
The bank’s topline improved in a cycle that has started to see the fall in interest rates. Its consolidated net revenue was Rs 85,350 crore for the June-ended quarter, up 17.8 percent year-on-year (y-o-y), but consolidated net profit was at Rs 16,260 crore, down 1.1 percent for the year. In this quarter, HDFC Bank, in the consolidated income statement, reported transaction gains of Rs 6,949 crore, from partial divestment through an offer for sale in the recent IPO of its subsidiary, HDB Financial Services.
The bank saw sluggish net interest margins (NIM) coming in at 3.35 percent for the June-ended quarter, compared to 3.5 percent a year earlier. Net interest income also weakened by 2 percent from the sequential quarter, to Rs 31,440 crore in the June quarter. The cost of funds, which is now at 4.8 percent, had inhibited the bank’s margins from improving back to 4 percent.
NIMs for the bank have stagnated between 3.4 percent and 3.5 percent from December 2023 onwards. Average advances under management for HDFC Bank have risen to Rs 27 lakh crore in March 2025 from Rs 23.3 lakh crore in Q2FY24, though the y-o-y growth has fallen sharply to 7 percent from 62 percent in the same period.
A lower cost of funds allows a bank to charge higher interest rates on loans and while maintaining a healthy NIM. Most banks in India are seeing lower NIMs—analysts forecast them to be subdued for more coming quarters—because falling lending yields are outpacing the fall in deposits costs, in a low interest rate cycle.
Post the earnings data, HDFC Bank’s CEO Sashidhar Jagdishan told analysts that the bank was ready to “get back into momentum from a slowing down which was seen last year. We see healthy demand for loans from the rural sector.” He was also optimistic that urban India consumption, which has been slowing, could start to improve with the onset of the festive season this August. Rural, retail, MSME and corporate lending are all starting to see a pick-up in demand for loans, the bank’s management said.
The management added they were comfortable with the asset quality levels, with gross non-performing assets (NPAs) at 1.4 percent of total advances and net NPAs at 0.5 percent, compared to 1.3 percent and 0.4 percent levels for the corresponding quarter a year earlier. Jagdishan maintained that the outlook for NPAs for the bank “will be benign” at this stage.
The bank reported a 6.7 percent y-o-y increase in gross advances to Rs 26.53 lakh crore during the first quarter. Its deposits grew by 16.4 percent y-o-y, totalling Rs 27.42 lakh crore. Its current account-savings account (CASA) deposits also rose by 3.1 percent y-o-y to Rs 9.37 lakh crore during the quarter.
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