HDFC Bank is no small name — it holds a mighty weight in the Indian stock market, making up nearly 11% of the Nifty 50. Over the past few quarters, however, investors have been worried, and for good reason: the bank’s Net Interest Margins (NIMs) have been slipping consistently. With the much-awaited results finally out, the question is simple — is the bank on the road to recovery?

Let’s break it down, one piece at a time.

Advances & Deposit Growth — The Growth Engine

One thing to keep in mind is that the YoY numbers aren't quite comparable this time, thanks to the big merger. But even so, the growth figures tell their own story:

Advances grew by 5%

Retail loans saw a healthier jump of 9%

Deposits surged by 15%

Now, loan growth has clearly slowed down — and that’s not accidental. The bank has deliberately cooled this to bring its Loan-to-Deposit Ratio (LDR) to safer levels. On the flip side, deposit growth is looking solid, which is always a positive sign for a lender like HDFC Bank.

Going forward, the bank will need to push harder on loan growth if it wants to truly fire on all cylinders.

Cost of Funds — A Step in the Right Direction

Another key highlight: the bank's cost of borrowing has eased, down to 4.9%. Wholesale borrowings are also down 14%. These numbers clearly suggest the bank is actively working to lower its funding costs — a crucial move if it wants to protect profitability as interest rate cycles turn.

Net Interest Margin (NIM) — Still a Red Flag

This is where things get a bit concerning. The one metric that has been nagging investors — the NIM — continues to be under pressure. It has dropped below the psychological 4% mark. To be precise, the bank’s core NIM now sits at 3.46%.

This is one area where HDFC Bank must improve over the next few quarters if it wants to win back market confidence.

Capital Adequacy — Rock Solid Foundation

In terms of capital, HDFC Bank is sitting comfortably:

Capital Adequacy Ratio is at 19.6%

Tier-1 Capital Adequacy at 17.2%

There are no alarm bells ringing here. The bank is well-capitalized to fund future growth and absorb potential shocks.

Asset Quality — Quiet but Positive

Here’s some good news on the asset quality front:

Gross NPA has dropped to 1.33% from 1.42%

Slippages have reduced significantly

Provision Coverage Ratio (PCR) stands strong at 74%

Credit cost ratio is at 0.43%

Net credit cost is at 29 Bps

Another mention for the Provisions Coverage Ratio, holding steady at 71%

All in all, asset quality seems to be stabilizing — something every investor wants to see.

Valuation — Cheapest in Years

Let’s talk valuation. The bank is now trading at just 2.5x Price-to-Book (P/B) — one of the lowest multiples HDFC Bank has seen in years. For long-term investors, this could be an interesting entry point, but of course, the margin recovery will be the real deciding factor.

HDFC’s Strategy This Quarter

The management seems clear about its roadmap:

Slow down corporate loan growth

Accelerate high-margin retail loan growth

Drive deposit growth

Increase the CASA ratio

Ramp up bulk deposits

If executed well, all these moves should eventually help the bank recover its margins — exactly what it needs at this stage.

So, Is There Any Excitement?

In one line: Not really.

The results are steady — neither a blockbuster nor a disaster.

1. Asset quality looks stable.

2. Retail loan growth is slowly coming back.

3. The bank is well-capitalized for future growth.

4. Deposit growth is solid and encouraging.

But the real challenge is clear: the bank must fix its margin problem over the next 3-4 quarters. Until then, the ship is steady, but not sailing full steam ahead.