The banking sector presented contrasting performance indicators in the third quarter, with major private sector lenders reporting varied growth trajectories in advances and deposits. While some banks demonstrated robust expansion, others faced challenges with declining loan portfolios.

Leading Private Banks Show Strong Growth

HDFC Bank, the country's largest private sector lender, emerged as a standout performer with a 12.00% increase in loan growth, reaching ₹28.44 lakh crore in the December quarter. The bank's total advances stood at ₹25.42 lakh crore as of December 31, 2024, demonstrating consistent expansion in its lending portfolio.

Axis Bank also reported strong provisional metrics as of December 31, 2025, with gross advances reaching ₹11.71 lakh crore, marking a 14.10% year-over-year growth from ₹10.26 lakh crore. The bank's quarterly performance showed a 3.70% quarter-over-quarter increase from ₹11.28 lakh crore.

Deposit Growth Patterns Across Institutions

Deposit mobilization showed positive trends among leading banks, with Axis Bank's total deposits climbing to ₹12.61 lakh crore, representing a 15.00% year-over-year increase from ₹10.96 lakh crore. The bank achieved a 4.80% quarter-over-quarter growth from ₹12.04 lakh crore.

HDFC Bank reported average deposits of ₹27.52 lakh crore, compared to ₹24.52 lakh crore in the third quarter of the previous financial year, maintaining its 12.00% growth momentum across both advances and deposits.

IndusInd Bank Faces Operational Challenges

IndusInd Bank reported contrasting performance with a 13.10% decline in loan growth to ₹3.19 lakh crore in the October-December quarter. The bank, which had disclosed accounting lapses in its derivatives portfolio with financial implications of ₹1,960 crore last year, held net assets of ₹3.67 lakh crore at the end of the third quarter of the previous fiscal.

The lender also recorded a 3.80% de-growth in deposits to ₹3.94 lakh crore in the reporting quarter, down from ₹4.09 lakh crore in the corresponding period of the previous financial year.

Rate Adjustments Signal Policy Response

Karur Vysya Bank announced significant rate reductions effective January 7, cutting both its Base Rate and Benchmark Prime Lending Rate by 45 basis points each.

This rate cut signals easing liquidity conditions and potentially benefits customers with Base Rate or BPLR-linked loans, while aligning with broader market rate trends and policy support measures.

HDFC Bank shares are drawing attention after its American Depositary Receipt fell 6.33% to $34.17 on Tuesday. This comes even as India's largest private sector lender reported robust growth across key business indicators for the third quarter ended December, according to its latest operational update.

Strong Q3 Performance Metrics

The bank demonstrated solid operational momentum with gross advances surging 11.9% year-on-year to ₹28.4 lakh crore, signaling sustained credit demand. Average advances for the quarter stood at ₹28.6 lakh crore, representing a 9% increase from the same period last year.

On the deposit front, momentum remained equally strong. Average deposits grew 12.2% year-on-year to ₹27.5 lakh crore, while average CASA deposits rose 9.98% to ₹8.9 lakh crore, indicating healthy low-cost funding growth.

Market Performance and Analyst Outlook

Shares of HDFC Bank have fallen 42.85% in the last 12 months and currently trade with a relative strength index of 52, which suggests neutral market sentiment. The recent ADR decline contrasts sharply with the bank's strong operational performance.

Despite the stock's underperformance, analyst sentiment remains overwhelmingly positive. Out of 48 analysts tracking the company, 46 maintain a 'buy' rating, two recommend a 'hold,' while none suggest 'sell,' according to Bloomberg data. The average 12-month consensus price target of ₹1,157 implies an upside of 16.9%.

Banking Sector Context

The banking sector has shown mixed performance for the December quarter, with HDFC Bank's strong showing contrasting against peers like IndusInd Bank, which reported a 13% year-on-year decline in net advances to ₹3.18 lakh crore. Meanwhile, Axis Bank posted solid growth with gross advances jumping 14% to ₹11.70 lakh crore, and Kotak Mahindra Bank delivered a 16% increase in net advances to ₹4.80 lakh crore.

The divergent performance between HDFC Bank's ADR movement and its operational metrics highlights the complex interplay between global market sentiment and domestic banking fundamentals, with investors closely monitoring how the bank navigates current market conditions.