However, operationally, the bank delivered a healthy performance, with net interest income (NII) rising 18% year-on-year (YoY) to Rs 2,092 crore, backed by strong growth in advances and a broader increase in interest-earning assets.
The net interest margin during the first quarter improved slightly to 7.7%.
Net total income for the quarter stood at Rs 2,726 crore, up 14% from the previous year, while pre-provisioning operating profit increased 17% to Rs 1,402 crore.
Total gross loans stood at Rs 1.09 lakh crore as of June 30, marking a 14% rise from Rs 95,629 crore a year earlier.
Asset under management (AUM) rose by 15% to Rs 1.09 lakh crore, indicating sustained credit demand across segments.However, provisions saw a sharp rise, with loan losses and provisions amounting to Rs 670 crore, up from Rs 412 crore a year ago. This led to a dip in profit before tax, which came in at Rs 733 crore, down from Rs 784 crore in Q1FY25.Asset quality weakened during the quarter, with gross stage 3 loans rising to 2.56% of total advances, compared to 1.93% a year ago.
Net stage 3 loans also climbed to 1.11%, from 0.77%. Provision coverage ratio on stage 3 assets fell to 56.70%, compared to 60.24% in Q1FY25.
Despite pressure on bottom-line profitability, the bank’s operational metrics remained strong, driven by double-digit growth in lending and income. However, rising provisions and deterioration in asset quality remain key monitorables for the coming quarters.
On Tuesday, HDB Financial stock fell 0.3% to settle at Rs 841 on NSE.