HDFC Bank vs Bajaj Finance Q2 FY25

HDFC Bank reported Q2 FY25 PAT of INR 16,800 crore, up 5.3% YoY (adjusted ~17% excluding bond gains and tax adjustments). Net interest margin remained stable at 3.46%. The bank is accelerating its loan-to-deposit ratio normalization, targeting high-80s within 2-3 years, with FY25 credit growth below system, FY26 at system, and FY27 above system. Deposit growth was healthy at ~13% YoY, with retail branches contributing 84%. Asset quality remained stable with GNPA at 1.4% and gross slippages at 1.2%. Management emphasized calibrated growth in unsecured loans and a cautious stance on wholesale lending due to tight spreads. Key risk: potential margin pressure from elevated liquidity and LCR buildup amid regulatory uncertainty.

Guidance read

Credit growth glide path: FY25 below system, FY26 at system, FY27 above system: Management outlined a three-year plan to normalize the loan-to-deposit ratio, with credit growth slower than system in FY25, matching system in FY26, and exceeding system in FY27. Target LDR of high-80s within 2-3 years: The bank aims to reduce its loan-to-deposit ratio from current ~110% to the high-80s over the next 2-3 years, faster than previously guided 4-5 years. NIM to remain in 3.45%-3.5% range in near term: Management expects net interest margins to stay within the current tight range, with potential improvement once LCR normalizes and regulatory clarity emerges.

Risk read

Key risks include Regulatory uncertainty on LCR and AIF provisions — Draft RBI circulars on LCR and AIF provisioning could impact liquidity requirements and capital adequacy; final guidelines are awaited.; Margin pressure from elevated liquidity buildup — Higher LCR (128%) and excess liquidity may depress near-term margins, though management views this as temporary.; Credit risk in unsecured and priority sector loans — Analysts raised concerns about potential asset quality deterioration in unsecured and priority sector lending; management downplayed risks citing calibrated growth.; Sticky deposit rates and competitive pressure — Deposit rates remain elevated due to credit growth outpacing deposit growth, pressuring margins; management noted limited pricing power in wholesale lending..

Promise ledger

Of 2 tracked promises, management 0 met, 0 close, 2 missed.

Bajaj Finance reported a mixed Q2 FY25 with AUM growth of 29% YoY and PAT up 13% to INR 4,014 crore, but elevated credit costs dampened profitability. Loan losses remained high at 2.16% of average assets, driven by higher flow rates across retail and SME portfolios, though Stage 2/3 additions moderated sequentially. Management guided FY25 credit costs to ~2.05%, above the earlier 1.75-1.85% range, but expects improvement to 2% by Q4. NIMs have stabilized, and cost of funds appears to have peaked. The company added 4 million new customers and expects to cross 100 million total customers by year-end. Festive season demand is tracking well with 21% volume growth. Key risk: credit normalization may take longer if macroeconomic conditions deteriorate or if unsecured lending stress persists.

Guidance read

FY25 credit cost guidance revised to ~2.05%: Net loan loss to average assets expected at 2.00-2.05% for FY25, up from earlier 1.75-1.85%. AUM growth of 27-28% for FY25: Full-year AUM growth guided at 27-28%, with new businesses contributing 2-3%. New customer addition of 15-16 million in FY25: Management expects to add 15-16 million new customers in FY25, marginally higher than last year's 14 million. Non-Bajaj Auto two-wheeler AUM to replace Bajaj Auto AUM by FY27: Non-Bajaj Auto two-wheeler financing will scale to 720,000 accounts in FY26, fully replacing Bajaj Auto AUM by end-FY26/FY27.

Risk read

Key risks include Elevated credit costs may persist — Credit costs remain above long-term averages; management is cautiously optimistic but normalization may take longer if macro conditions worsen.; Unsecured lending stress from multiple loans — Clients with 3+ live unsecured loans show higher default propensity; supply-side slowdown may not fully mitigate risk.; Loss of Bajaj Auto captive financing business — Bajaj Auto's captive financing unit is taking over two-wheeler/three-wheeler financing, impacting AUM and profitability in the near term.; Regulatory and compliance risks — Management declined to comment on regulatory matters; ongoing investments in compliance may not fully mitigate future actions..

Promise ledger

Of 2 tracked promises, management 0 met, 0 close, 2 missed.