HDFC Bank vs Axis Bank: Same 1.9x book value, very different profit growth
Axis Bank grew its loan and deposit book faster than larger rival, HDFC Bank in the September 2026 quarter. A sharp decline in its provisions helped Axis Bank to grow its standalone net profit by 37.6% y-o-y in the quarter, well ahead of HDFC Bank.
Investors have been keen to understand the impact on banks, in terms of various operational parameters from the recently concluded nearly $ 130 billion fund raising in FCNR (B) deposits under the window provided by the RBI. In addition, Dalal Street is keeping a close eye on 10-year government bonds, which have shown a rising trend, in tune with the global trend. Yields on 10-year government bonds have crossed 7% at the end of the second quarter of FY27, and their negative impact on banks’ net profits is also being monitored by investors.
And the Middle East crisis has shown no signs of ending, and once again investors will be analyzing the impact of regional wars on the local banking system. HDFC Bank, the largest private sector bank, and Axis Bank reported their September 2026 quarter results on Saturday, and investors were keen to understand the performance on various parameters – loan and deposit growth, net interest margins (NIM) and asset quality, amongst others.
FE Stock Insights on WhatsApPGet instant alerts on high-conviction investment themes and fundamental deep dives—direct from Financial Express.Join now The Credit Divergence: How Axis Outpaced HDFC’s 16.4% Growth Axis Bank has grown its loan and deposit book at a faster pace y-o-y in the second quarter of FY27 as compared to HDFC Bank, the largest private sector bank. HDFC Bank grew its loan book by a healthy 16.4% y-o-y to Rs 31.95 lakh in the quarter.
The bank has highlighted loans to high-margin small and mid-market enterprises (SMEs) grew by 23.5% y-o-y, and corporate and other wholesale loans grew by 16.4% y-o-y. HDFC Bank had raised nearly $ 11.5 billion or nearly Rs 1.1 lakh crore from FCNR (B) deposits from overseas in the quarter. It has highlighted its overseas branches have also extended loans of $ 5.7 billion (nearly Rs 54,800 crore) against these deposits, and it contributed to the strong loan growth in the quarter.
Credit growth is an important operational parameter, and investors have been keenly tracking this metric for HDFC Bank and other banks. Meanwhile, Axis Bank also grew its loan book by 23% y-o-y to Rs 13.73 lakh crore in the quarter. Axis Bank has highlighted strong demand from high-margin SME loans that grew 25% y-o-y while retail loans grew 25%. Its mid-corporate loan book also grew 29% y-o-y. Axis Bank had raised FCNR (B) deposits of nearly $ 10.6 billion (nearly Rs 1.01 lakh crore) and its international branches had extended loans worth nearly $ 4.57 billion (nearly Rs 43,800 crore) as leveraging (refers to credit provided) facility for placing such deposits.
Loans against FCNR (B) deposits have also contributed to the strong loan growth for the bank in the quarter. The double digit loan growth for both the banks is commendable as the second quarter of a financial year is traditionally described as the “slack” season for credit, given that it is the monsoon season across most parts of the country and business activity is often sluggish. Also, this year, the monsoon season was broadly deficient in the country in the states like Maharashtra and Karnataka declaring drought in several districts In addition, the Middle East crisis has not yet shown any impact on credit growth for HDFC Bank and Axis Bank.
Core banking performance in 2QFY27 – HDFC Bank v/s Axis Bank BankGrowth in lending (% change y-o-y)Growth in deposits (% change y-o-y)Net Interest Margin (%)HDFC Bank16.4%18.8%3.3% (on interest earning assets)Axis Bank23%20.7%3.55% (NIM- domestic)Source – Bank results and presentations The FCNR Advantage: Winning the Q2 Deposit War Apart from strong loan growth, HDFC Bank also grew its deposits by 18.8% y-o-y to Rs 33.27 lakh crore in the quarter.
HDFC Bank has highlighted deposit growth was driven by 22.8% y-o-y growth in time deposits (mainly fixed deposits) to Rs 22.75 lakh crore in the quarter. Deposits form the basis of a bank to provide loan / credit facilities. Meanwhile, Axis Bank grew its deposits by 20.7 % y-o-y to Rs 14.5 lakh crore in the quarter, and the bank has highlighted its term deposits grew 27.3% y-o-y to Rs 9.2 lakh crore.
HDFC Bank and Axis Bank’s core banking operations are reflected in their respective standalone results. Margin Compression: Why NIMs Are Feeling the Heat in Q2FY27 Net interest margin (NIM) is another key operational metric that is tracked by investors. For HDFC Bank, its NIM was 3.3% of interest earning assets in the second quarter of FY27 as compared to 3.4% a year earlier. And Axis Bank has highlighted its NIM – domestic was 3.55% as compared to 3.8% a year earlier.
Over the past several quarters, banks have focused on expanding loans to retail and SME sectors as it helps them to earn a higher NIM as compared to top-level corporates. The RBI had followed a ‘soft’ interest policy till the end of the second quarter of FY27, and this in turn has put a temporary pressure on NIMs of banks like Axis Bank and HDFC Bank. Navigating Regional Crises: The 0.35% NPA Reality In the September 2026 quarter there was no visible impact from the Middle East crisis, in terms of a rise in NPA levels for HDFC Bank and Axis Bank.
For HDFC Bank, its % of net NPAs to net advances was 0.37% in the quarter as compared to 0.42% a year earlier. Its provisions were also Rs 3,573 crore as compared to Rs 3,500 crore a year earlier. HDFC Bank has highlighted that it had made a floating provision of Rs 9,000 crore in FY26. However, HDFC Bank’s tax expenses grew 10.7% y-o-y to Rs 6,399.8 crore, and as a result, its standalone net profit grew only 4.7% y-o-y to Rs 19,510 crore in the quarter.
Meanwhile, Axis Bank’s % of net NPA was 0.35% in the quarter as compared to 0.44% a year earlier. Its provisions were also Rs 1,693.7 crore in the quarter as compared to Rs 3,547 crore a year earlier. Strong loan growth and lower provisions helped Axis Bank’s standalone net profit rise 37.6% y-o-y to Rs 7,003 crore in the quarter. The Profitability Anchor: HDFC’s 1.8% RoA Benchmark HDFC Bank’s return on assets (average) – not annualized was 0.45% in the quarter, and on annualizing it would be nearly 1.8%.
Axis Bank’s RoA (annualized) was 1.38% in the quarter. Efficiency levels – HDFC Bank versus Axis Bank BankReturn on assets (in %)HDFC Bank1.8% *Axis Bank1.38%*Annualising RoA for September 2026 quarterSource – Banks results and investor presentation The Bagchi Era & RBI Rate Hikes: Factoring the Q3 Outlook HDFC Bank has recently appointed Anup Bagchi, managing director and chief executive officer, for a period of three years from October 27, 2026.
Investors will be closely monitoring Bagchi’s strategy over the next few quarters to ensure sustained growth on key operational parameters – credit and deposit growth along with NIMs, amongst others. The RBI in its monetary policy in early October, 2026 had raised interest rates by 0.25%. Interest rates on different types of loans are expected to rise in the ‘busy’ season currently underway, and banks are also flush with FCNR (B) deposits.
As a result, banks may not raise deposit rates in a hurry. The above scenario should help banks to improve their NIMs, going forward. These 2 rivals trade at up to a 52% discount The 1.9x Multiplier: Are Private Banks Currently Undervalued? HDFC Bank ended broadly flat at Rs 728 on Friday. The stock is hovering above its 52-week low of Rs 682 that was reached on 11 September, 2026. HDFC Bank trades on the preferred valuation matrix – price-to-(standalone) book value of 1.9 times.
Over the past 5 years, it has traded between 1.9 times and 4.3 times. Valuations – HDFC Bank v/s Axis Bank BankPrice-to-(standalone) book valueHDFC Bank1.9 timesAxis Bank1.9 timesSource- Screener.in Axis Bank ended Friday’s trade broadly flat at Rs 1,286.5. The stock is hovering above its 52-week low of Rs 1,150 that was reached on 2 April, 2026. Axis Bank trades on the above valuation matrix at 1.9 times, and over the past 5 years, it has traded between 1.7 times and 3.1 times.
The demand for credit is expected to be strong in the ‘busy’ season. Also, with the RBI hiking rates, NIMs are expected to improve for banks including HDFC Bank and Axis Bank. HDFC Bank and Axis Bank are trading close to the lower end on the above valuation matrix. Readers can add both the stocks to their watch list for 2026. Disclaimer: Amriteshwar Mathur is a financial journalist with over 20 years of experience.
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