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The market expects HDFC Bank to carry on much as it has.
At today’s share price, buyers are assuming HDFC Bank earns about 15% a year on the money invested in it, from here on. Over the last ten years it actually earned about 15.1% a year. The two are close, so the share price does not need the business to improve or to stumble. It needs it to keep doing roughly what it already does.
- How it is valued: Excess return — the correct lens for a bank.
- What the price assumes: 15.0% return on equity, against 15.1% the model takes from its own record.
- Ten-year record: Between FY2019 and FY2026, HDFC Bank's revenue went from ₹1,24,108 crore to ₹4,95,463 crore — it compounded at about 22% a year over 7 years.
- Biggest swing factor: Return on equity. Main risk: Slower growth for longer.
01India's largest private bank, reshaped by a merger
HDFC Bank is India's largest private-sector bank, built on retail lending, low-cost current and savings deposits and a long record of keeping bad loans low. In July 2023 it merged with HDFC Ltd, the housing-finance company that founded it, adding a large home-loan book and bringing the group's life insurer, general insurer and asset manager under the bank.
The merger changed the bank's shape. Home loans earn thinner margins than personal or card lending, and HDFC Ltd's borrowings cost more than bank deposits. Since then the bank has concentrated on growing deposits faster than loans to bring its loan-to-deposit ratio back down, which has held loan growth back in the short term.
02What the market is assuming
Work backwards from today's share price and you can see what buyers are quietly taking for granted. Here is the return on equity that price implies for HDFC Bank, next to what the model assumes from the company's own record.
The further apart these two numbers are, the bigger the bet a buyer at today's price is making.
03HDFC Bank's record, in plain numbers
Between FY2019 and FY2026, HDFC Bank's revenue went from ₹1,24,108 crore to ₹4,95,463 crore — it compounded at about 22% a year over 7 years. Net profit grew from ₹39,689 crore to ₹76,026 crore, about 10% a year — slower than revenue, so margins narrowed. In FY2026 it kept 15.3% of revenue as net profit — against a low of 15.0% in FY2025 and a high of 32.0% in FY2019. The latest year added 5.2% to revenue, well behind its own long-run pace. FY2021 is missing from the filed series used here, so that year is left out rather than estimated.
Revenue and earnings per share in ₹, return on equity and leverage as ratios — all from the filed statements.
Revenue and net profit by year (₹ crore)
| Year | Revenue | Net profit | Margin |
|---|---|---|---|
| FY2019 | 1,24,108 | 39,689 | 32.0% |
| FY2020 | 1,47,068 | 27,296 | 18.6% |
| FY2022 | 1,67,695 | 38,151 | 22.8% |
| FY2023 | 2,04,666 | 46,149 | 22.5% |
| FY2024 | 4,07,995 | 64,062 | 15.7% |
| FY2025 | 4,70,916 | 70,792 | 15.0% |
| FY2026 | 4,95,463 | 76,026 | 15.3% |
04How HDFC Bank gets valued — and why
Excess return — the correct lens for a bankA bank is not valued with a discounted cash flow. Deposits are its raw material and interest is operating income, so enterprise value means nothing here. It is valued on excess return instead — the profit it earns above the cost of the equity funding it.
05What decides HDFC Bank's value
Return on equity
A bank is worth more than its book only to the extent it earns above its cost of equity. The 'what the market is assuming' figure on this page shows how much return today's price already takes for granted.
Deposit growth
How fast it gathers cheap deposits sets how fast it can lend without pushing up its funding costs.
Net interest margin
The mortgage-heavy mix from the merger lowered margins; recovering them is one of the main levers on value.
Asset quality
Credit costs have been low for years. A rise in bad loans — especially unsecured retail — would hit returns first.
06What could go wrong
- Slower growth for longer. If the deposit catch-up takes longer, loan growth stays below its historical pace.
- Interest-rate cuts. Falling rates can squeeze lending margins before deposit costs adjust.
- Integration. Combining two large balance sheets and cultures carries execution risk that takes years to settle.
07What the full HDFC Bank valuation shows
Sign in free to see the complete HDFC Bank valuation
- ✓Fair value per share — from an excess-return model — the method banks are actually valued on
- ✓The bank workpaper — book value, cost of equity and sustainable return, step by step
- ✓Bull, base and bear cases — and exactly which assumptions move between them
- ✓Peer comparison — against ICICI Bank, Kotak Mahindra Bank and Axis Bank
- ✓Downloadable report — the full write-up, yours to keep
08Compare HDFC Bank with peers
The same valuation, run side by side.
HDFC Bank vs ICICI BankThe two largest private banks, on the same excess-return model.→HDFC Bank vs Kotak Mahindra BankHigher-margin, smaller book — a different trade-off on the same measures.→HDFC Bank vs Axis BankComparable scale, historically a different credit record.→HDFC Bank vs LICA bank valued on excess return against a life insurer valued on embedded value.→09Questions people ask about HDFC Bank
Why isn't HDFC Bank valued with a P/E or a DCF?
Deposits are a bank's raw material, not its debt, so free cash flow and enterprise value say little. The excess-return model asks how much more than its cost of equity the bank earns on its book, and for how long — the standard way banks are valued.
How did the HDFC merger change HDFC Bank's valuation?
It made the bank larger and more mortgage-heavy, lowered its net interest margin and raised its loan-to-deposit ratio. The value now depends on whether returns recover towards pre-merger levels as deposits catch up.
What return on equity does HDFC Bank need to justify its price?
The reverse-solved figure in 'What the market is assuming' answers exactly that: the return on equity, held for the long run, that makes today's share price fair. Compare it with what the bank has actually earned.
Is HDFC Bank overvalued?
At ₹804 the market is pricing in roughly 15.0% sustained ROE, against the ~15.1% its own record supports. That is close to what it has delivered, so the price is broadly consistent with the company simply continuing as it has.
What is the intrinsic value of HDFC Bank?
It is computed from the filed financial statements using the method that fits this business (excess return), with every assumption shown alongside the result. The per-share figure and the full working are in the report.
How much debt does HDFC Bank carry?
Debt to equity stands at 1.01, down from 1.61 at the start of the period — the balance sheet is a core input to the cost of capital used here.