HDB Monetary Providers shares in focus as Q2 PAT sees 2% YoY progress

Shares of HDB Monetary Providers are anticipated to be in deal with Thursday, October 16, after the corporate reported a 2% year-on-year (YoY) rise in its internet revenue for the July–September quarter. The corporate posted a revenue after tax (PAT) of Rs 581 crore in Q2FY26, in comparison with Rs 571 crore within the corresponding interval of the earlier 12 months.

HDB Monetary additionally reported a 13% YoY enhance in income from operations, which rose to Rs 4,545 crore for the quarter. Internet curiosity earnings (NII) registered a strong 20% YoY progress, coming in at Rs 2,192 crore as towards Rs 1,833 crore in the identical quarter final 12 months. The rise in NII was supported by increased yields and environment friendly funding methods. Moreover, the corporate’s internet curiosity margin (NIM) improved to 7.9% through the quarter, up from 7.5% within the year-ago interval.

Nonetheless, asset high quality confirmed slight deterioration. The gross non-performing asset (NPA) ratio rose to 2.81% from 2.56% within the earlier quarter, whereas internet NPA stood at 1.27%. The availability protection on Stage 3 property remained robust at 54.7%. Credit score prices elevated considerably to Rs 748 crore, up from Rs 431 crore a 12 months earlier.

The rise in provisioning led to a 3.3% YoY decline in revenue earlier than tax from the lending enterprise, which fell to Rs 753 crore. For the primary half of FY26, HDB Monetary reported a revenue of Rs 1,149 crore, in comparison with Rs 1,173 crore in the identical interval final 12 months.

After the corporate’s Q2 outcomes, international brokerage agency Morgan Stanley has maintained an “Equalweight” ranking on HDB Financials, revising its goal worth to Rs 805 from Rs 830.

The corporate’s Q2FY26 revenue after tax (PAT) declined 2% year-on-year (YoY), however nonetheless beat each Morgan Stanley’s personal estimate of a 13% drop and the consensus estimate of a 1.5% enhance. This efficiency was pushed by stronger internet curiosity earnings (NII), which rose 20%, and pre-provision working revenue (PPOP), which elevated by 24%.The web curiosity margin (NIM) got here in at 7.92%, barely above Morgan Stanley’s estimate of seven.76%, supported by a 25 foundation factors quarter-on-quarter enchancment in mortgage spreads. Credit score prices remained elevated, however Stage 3 protection was regular at 117%.Asset high quality considerations persist, particularly within the industrial automobile section, which was impacted by floods and an prolonged monsoon season. Nonetheless, tendencies in Stage 2 property are starting to indicate indicators of stabilization.

Administration expects credit score prices to ease ranging from the third quarter of FY26, with a medium-term goal stage of roughly 2.2%. The agency has raised its FY26 earnings per share (EPS) estimate by 4%, although the projections for FY27–28 are barely decrease. NIM is forecast to common round 7.95%, and the corporate’s property underneath administration (AUM) compound annual progress price (CAGR) has been trimmed to 16.4% from 18.6%.

By way of valuation, Morgan Stanley notes that HDB Financials at the moment trades at 2.6 occasions FY27E price-to-book and an 18x price-to-earnings a number of, providing solely modest upside potential.

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