HDB Financial Services has announced its medium-term growth outlook, projecting book growth to match nominal GDP plus an additional 6-7% starting from Q3 FY26. The company has also provided guidance on its Net Interest Margin (NIM) expectations for the upcoming periods.

Growth Projections and Timeline

The financial services company expects its book growth trajectory to align with the broader economic indicators, specifically targeting nominal GDP growth plus an incremental 6-7%. This growth framework is set to commence from Q3 FY26, providing a clear timeline for the company's expansion plans.

Net Interest Margin Outlook

HDB Financial Services has outlined its NIM projections with specific targets and expectations:

The company currently maintains a NIM of 8.09%, which is positioned above the projected medium-term range of 7.9% to 8%. Management anticipates this current level will remain steady throughout the upcoming quarters, with possibilities for slight improvements.

Financial Performance Expectations

The company's guidance suggests a conservative yet optimistic approach to its financial performance. The alignment of book growth with nominal GDP plus additional percentage points indicates the company's strategy to outpace general economic growth while maintaining sustainable expansion rates.

The NIM guidance reflects the company's confidence in maintaining healthy interest spreads while navigating market conditions. The projection of steady NIM levels with potential for slight improvements suggests effective asset-liability management and pricing strategies in the medium term.

HDB Financial Services reported mixed third-quarter results that led to contrasting market reactions, with the company posting strong profit growth while facing concerns over loan growth momentum and asset quality metrics. The financial services subsidiary of HDFC Bank delivered a significant jump in profitability, though brokerage firms expressed caution about near-term prospects.

Financial Performance Overview

The company's Q3 performance showed robust profitability improvements alongside steady operational metrics:

Profitability and Margin Expansion

HDB Financial Services achieved a remarkable 36% year-on-year increase in net profit to ₹644.00 crore for the quarter ended December 31, compared to ₹472.00 crore in the corresponding period last year. Net interest income surged 22% to ₹2,285.00 crore, supported by easing pressure on funding costs. The company's net interest margins expanded by 14 basis points quarter-on-quarter, while credit costs improved by 20 basis points sequentially to 2.50%.

Asset Quality and Growth Concerns

Despite stable asset quality metrics, some performance indicators raised concerns among analysts:

Loan growth decelerated to 12.20% from 13% in the previous quarter, falling short of management's stated aspiration of 18-20% compound annual growth rate over the next three to five years. Disbursements grew by only 10% year-on-year, reflecting challenges in the asset finance and enterprise lending segments.

Brokerage Reactions and Market Response

The mixed quarterly performance prompted varied responses from research firms. Motilal Oswal maintained its 'Neutral' rating with a price target of ₹815.00, citing that current valuations already factor in medium-term growth potential. The brokerage emphasized the need for clearer evidence of stronger loan growth execution and structural improvements in return ratios.

Emkay Global took a more cautious stance, downgrading the stock to 'Reduce' from 'Buy' and cutting its price target by 12% to ₹750.00 from ₹850.00. The firm trimmed its estimated assets under management growth by 2-4% and marginally raised credit cost assumptions, resulting in a 5-6% reduction in earnings per share estimates. Emkay highlighted near-term downside risks from potential stress in vehicle finance and unsecured lending segments.

Shares of HDB Financial Services closed 0.37% lower at ₹764.75, reflecting investor concerns about the company's growth trajectory despite strong profitability metrics.