Bank stocks rally on Q1 results; HDFC announces 1:1 bonus issue
Banking stocks surged in mid-day trading on Monday with the Nifty Bank index gaining 0.84 per cent to 56,756.85 points as Q1 results from major lenders largely beat expectations. ICICI Bank led gains with a 2.37 per cent rise to ₹1,459.60, while HDFC Bank advanced 1.80 per cent to ₹1,992.70 after announcing a 1:1 bonus share issue.
The banking index saw 5 stocks advancing against 7 declining, with total value traded reaching ₹5,748.67 crore on volume of 773.83 lakh shares. Other gainers included IDFC First Bank up 0.93 per cent and Kotak Mahindra Bank rising 0.66 per cent, while IndusInd Bank declined 2.76 per cent and AU Small Finance Bank fell sharply by 5.62 per cent.
HDFC Bank emerged as the standout performer, reporting net profit of ₹18,155 crore against poll estimates of ₹17,067 crore. The bank announced bonus shares in 1:1 ratio with record date of August 27, 2025, and a ₹5 special dividend with record date of July 25, 2025. Net interest income came in at ₹31,438 crore versus expectations of ₹31,384 crore, though gross NPAs rose to 1.40 per cent from 1.33 per cent quarter-on-quarter, indicating some asset quality pressure.
ICICI Bank delivered equally strong numbers with net profit of ₹12,768 crore beating estimates of ₹11,747 crore and NII of ₹21,635 crore against poll of ₹20,923 crore. The bank maintained stable gross NPAs at 1.67 per cent but saw net NPAs tick up to 0.41 per cent from 0.39 per cent sequentially. Deposit growth of 13 per cent and CASA growth of 14 per cent were viewed positively by analysts.
Smaller lenders faced significant headwinds. AU Small Finance Bank plunged 5.62 per cent to ₹750.20 after disappointing results with NIM profile falling 38 basis points to 5.4 per cent and elevated credit costs of 1.97 per cent. The bank’s credit cost guidance was raised by 10-15 basis points, raising concerns about asset quality trends.
Bandhan Bank also underperformed with advances at ₹128,510 crore showing modest 2 per cent year-on-year growth but 2.6 per cent quarter-on-quarter decline. The bank’s net profit fell 65 per cent year-on-year to ₹372 crore against expectations of ₹420 crore, while gross NPAs deteriorated to 4.96 per cent from 4.71 per cent sequentially. Slippages remained elevated at ₹1,550 crore with a slippage ratio of 4.82 per cent.
RBL Bank’s Q1 pre-provision operating profit missed estimates by 16 per cent due to lower NII and higher operating expenses, though credit costs were better than expected at 1.9 per cent. The bank’s gross slippage ratio remained elevated at 4.6 per cent, though management indicated that JLG stress had subsided.
Brokerages maintained overwhelmingly positive stance on sector leaders. Jefferies raised HDFC Bank’s target price to ₹2,400 from ₹2,340, citing improving growth outlook and successful merger synergies. Multiple firms upgraded ICICI Bank targets, with Jefferies hiking it to ₹1,760 from ₹1,710, Nomura raising to ₹1,740, and Nuvama setting ₹1,670. CLSA maintained outperform on HDFC Bank with target of ₹2,300, calling it a “rock solid” performance.
The divergent performance highlighted the gap between large private banks, which demonstrated resilient margins and manageable asset quality, and smaller lenders grappling with sector-specific challenges in microfinance and unsecured lending portfolios.
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Published on July 21, 2025