HDFC Bank ROA slips 40 bps to 1.5%, CASA still below pre-merger
Q1 FY27 concall reveals a 40 bps ROA drop, a CASA ratio that hasn't recovered from the merger, and a recovery plan targeting 38% CASA and 60% retail loans. Margins are expected to improve as high-cost borrowings mature.
— 4 earlier stories on HDFC Bank Ltd. →What's new
- ROA fell 40 bps to 1.5%, contradicting prior stability claims.
- CASA ratio remains below pre-merger levels; management targets ~38%.
- Full-year margins expected to improve as high-cost borrowings mature.
Why this matters
The ROA drop is the first real crack in HDFC Bank's post-merger earnings quality. Management's recovery plan, CASA at 38% and retail loan mix 60%, is credible but will take time. For now, the market has to price in a longer restructuring than initially hoped.
What we're watching
- Whether CASA actually climbs toward 38% by Q4.
- Margin trajectory as high-cost borrowings roll off.
- CEO Sashi Jagdishan's reappointment status.
The full read
HDFC Bank's Q1 FY27 concall confirmed what the standalone numbers hinted at: the post-merger transition is still messy. Return on assets slipped 40 bps to 1.5%, and the CASA ratio hasn't recovered to pre-merger levels, a key profitability driver. Management's recovery blueprint is specific: target 38% CASA and a 60% retail loan mix. Margins should benefit as high-cost borrowings roll off and deposit growth accelerates. Cost-to-income efficiency is also on the radar. The tone was candid but confident. The open questions are the CEO's reappointment (still pending) and whether the 40 bps ROA erosion proves temporary or structural. For now, the market waits.
Questions answered
- Why did HDFC Bank's ROA drop 40 bps to 1.5%?
- The drop reflects a very tough period of internal restructuring, including higher funding costs and a lower CASA ratio. Management expects ROA to recover as deposit growth outpaces history and higher-cost borrowings mature.
- What is the company's CASA target and how does it compare to pre-merger?
- CASA ratio remains below pre-merger levels. Management has set a target of near 38%, up from current levels, but did not give a timeline.
- What is the margin outlook?
- Full-year margins are expected to improve as higher-cost borrowings mature and deposit growth outpaces historical trends. Management also expects cost-to-income efficiency to improve.
- Is CEO Sashi Jagdishan's reappointment confirmed?
- Not yet. The concall highlighted the stabilising effect of new chairman Rajiv Kumar's appointment, but Jagdishan's reappointment remains pending.
- What is the expected credit loss (ECL) provisioning timeline?
- The bank expects a smooth transition to ECL provisioning in April 2027. No impact on current provisions was discussed.
- How did new chairman Rajiv Kumar affect the call?
- Management noted his appointment has a stabilising effect, but no specific strategic changes were linked to him. The CEO reappointment is still pending.
HDFC Bank Ltd.
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All notes on HDFCBANK →- 18 Jul 2026 · 5:23 PM IST HDFC Bank ROA slips 40 bps to 1.5%, CASA still below pre-merger
- 10d ago HDFC Bank logs 5% profit rise in Q1, provisions drop sharply
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- 29d ago HDFC Bank names Rajiv Kumar as chairman, subject to RBI nod