HDFC Bank Ltd. makes a corporate announcement

The Rs 13 final dividend implies a mechanical CET1 reduction of about 0.67 percentage points. Using the bank’s FY26 CET1 ratio of 17.28% and risk-weighted assets of Rs 29,74,116.57 Crores, the Rs 13 payout on 15,39,33,68,328 shares represents approximately Rs 20,011.38 Crores of capital distribution. Assuming RWAs are unchanged, the payout impact is:

• CET1 impact = Rs 20,011.38 Crores / Rs 29,74,116.57 Crores = 0.67 pp
• Implied CET1 before recognising the proposed final dividend = approximately 17.95%
• CET1 after the dividend = approximately 17.28%

These are derived estimates using the announced dividend, issued share count and FY26 RWA data ^{[1] [2] [3]}.

The important accounting point is that the bank has already reckoned the effect of the proposed dividend in its capital-funds calculation. Therefore, the reported 17.28% CET1 ratio should be treated as broadly post-final-dividend provision; the payout should not be deducted again from 17.28% when it is actually paid ^[4].

Alignment with capital allocation policy

The payout is consistent with the bank’s stated post-merger approach of balancing shareholder distributions with retention of capital for future growth. FY26’s final Rs 13 dividend, together with the Rs 2.50 special interim dividend, takes total dividend to Rs 15.50 per share and the aggregate payout to Rs 23,847.94 Crores, equivalent to a 31.9% payout ratio ^[4].

That is comfortably below the bank’s stated policy limits: the dividend policy caps the annual payout at the lower of 75% of adjusted PAT and the RBI-linked CET1 payout matrix; with FY26 CET1 at 17.28%, the applicable matrix permitted up to 60% of adjusted PAT ^[5]. In effect, the bank distributed roughly one-third of FY26 profit and retained roughly two-thirds, preserving capital for balance-sheet growth after the HDFC Ltd merger while still returning cash to shareholders ^{[6] [7]}.

Conclusion: the Rs 13 payout modestly reduces CET1 by about 67 bps, but does not compromise the bank’s capital-allocation framework; it remains a measured payout rather than a capital distribution that prioritises shareholders over post-merger growth needs.

The latest Q2 FY27 filing points to persistent but moderating NIM pressure: NII grew 9.7% YoY, but the margin remains constrained by a deposit mix tilted toward higher-cost time deposits. The derived EOP LDR is approximately 96.76%, below the previous 98.7% level but still above management’s stated 85–90% operating comfort range.

NIM trajectory: what the latest filing shows

Management had also previously said that non-retail deposit costs remained elevated even while retail deposit costs were relatively steady, and that more stable system liquidity was required for funding rates to normalize ^[12]. That is consistent with the Q2 deposit-mix data.

One data-quality caveat matters: the Q1 KPI line shows NIM at 3.0% ^[13], while the Q1 filing reports 3.26% on total assets and 3.40% on interest-earning assets ^[9]. The precise sequential change should therefore be treated as the filing-defined comparison, not as a fully reconciled time series.

LDR versus comfort levels

Using the latest EOP figures:

• Gross advances: Rs 3,219,500 Crores ^[10]
• EOP deposits: Rs 3,327,400 Crores ^[10]
• Derived LDR = gross advances / deposits = 96.76%

This is approximately 1.94 percentage points lower than the 98.7% CD ratio reported for Q3 FY26 ^[14], so the glide path is moving in the right direction. However, it remains roughly 6.76 percentage points above the upper end of management’s stated pre-merger operating range of 85–90% ^[14].

The 85–90% figure is a management operating target, not a confirmed RBI-prescribed LDR ceiling. A separate regulatory LDR comfort threshold could not be confirmed from the cited quarterly material. The practical implication is that the bank still has less balance-sheet flexibility than its own target range would imply, which can constrain loan-growth ambition and prolong the focus on deposit mix and funding-cost normalization.

Verdict: In Q2 FY27, HDFC Bank’s period-end deposit growth of 18.8% YoY was below Axis Bank’s 20.7% YoY, but above ICICI Bank’s 17.0% YoY excluding FCNR(B) deposits. ICICI’s headline 27.1% was inflated by FCNR(B) inflows and is not directly comparable. On cost of funds, a clean Q2 ranking cannot be established: Axis disclosed an absolute Q2 figure, while the latest absolute HDFC Bank and ICICI Bank figures available are Q1 FY27.

Deposit-growth read

• Against Axis: HDFC was lower by approximately 1.9 percentage points on the EOP basis: 18.8% versus 20.7% ^{[15] [19]}. Axis also reported stronger QAB growth of 23.0% ^[20].
• Against ICICI: HDFC was ahead by approximately 1.8 percentage points versus ICICI’s FCNR-adjusted growth of 17.0% ^{[15] [17]}. However, ICICI’s reported headline growth of 27.1% reflects a substantial FCNR(B)-related contribution, so it should not be used as a clean underlying comparison ^[17].
• HDFC’s deposit mix remained more term-deposit-heavy: average time deposits grew 19.7% YoY, versus 10.7% for average CASA deposits ^[22]. This is relevant because faster term-deposit growth generally provides less evidence of low-cost funding momentum than CASA growth.

Cost-of-funds read

• Axis reported Q2 FY27 cost of funds at 5.07%, with management indicating an 8 bps YoY reduction ^{[21] [23]}.
• HDFC Bank’s latest structured cost-of-funds figure is 5.8% for Q1 FY27, while management described the sequential movement as broadly flat and the YoY decline as approximately 40–50 bps ^{[16] [24]}.
• ICICI Bank’s latest structured figure is 4.6% for Q1 FY27 ^[18].

Implication: HDFC’s deposit momentum is competitive but not leading: it is slightly behind Axis on headline EOP growth and modestly ahead of ICICI after removing FCNR(B). The funding-cost comparison is less conclusive because the latest absolute figures are not aligned to the same quarter. On the latest available reported numbers, ICICI had the lowest cost of funds, Axis was next, and HDFC was highest—but that ranking mixes Q1 data for HDFC and ICICI with Q2 data for Axis and should be treated as directional, not fully like-for-like.