HDFC Bank vs Bank of Baroda (2026): Growth, NIM, ROA, Valuation & Which Is Better?
HDFC Bank versus Bank of Baroda is a useful example of why bank investors must separate recurring earnings from accounting events before comparing valuations.
HDFC Bank reported Q1 FY2027 standalone profit of roughly ₹19,060 crore.
Bank of Baroda reported only ₹1,278 crore.
Reading those two figures literally would make the comparison look absurdly one-sided.
It is not.
Bank of Baroda absorbed a roughly ₹5,680 crore exceptional charge connected with settlement of legacy NMC Group litigation.
Management said profit excluding that item would have been around ₹5,528 crore.
HDFC's prior-year comparison has the opposite complication: Q1 FY2026 contained the large HDB Financial Services stake-sale gain.
Both banks therefore require earnings normalisation—but for completely different reasons.
The BullRun Reported-Profit Filter
Before using P/E, ROA or ROE, ask whether the earnings denominator came from normal banking operations.
Bank of Baroda passes the first two tests much better than its reported PAT suggests.
HDFC's current quarter itself is relatively clean, but its year-on-year growth comparison is distorted by the HDB transaction in the prior-year base.
HDFC Bank vs Bank of Baroda: the operating numbers
| Metric | HDFC Bank | Bank of Baroda | Current Reading |
|---|---|---|---|
| Q1 standalone PAT | ₹19,060 Cr | ₹1,278 Cr reported | BoB distorted by exceptional charge |
| Normalised / adjusted PAT context | Reported growth ~5%; closer to ~10% after adjusting prior-year HDB gain | ~₹5,528 Cr excluding NMC settlement | Both require normalisation |
| NII | ₹33,536 Cr | ₹12,524 Cr | HDFC scale |
| NII growth | +6.7% | +9.5% | BoB |
| Period-end deposits | ₹31.71 lakh Cr | ₹16.33 lakh Cr global | HDFC |
| Deposit growth | +14.7% | +13.8% global | HDFC slightly |
| Advances | ₹30.61 lakh Cr gross advances | ₹14.16 lakh Cr global advances | HDFC |
| Advance growth | +15.4% | +17.4% | BoB |
| CASA ratio | 32.3% | 37.72% domestic | BoB |
| NIM | 3.26% total-assets / ~3.40% earning-assets basis | 2.77% global / 2.93% domestic | HDFC |
| Reported ROA | ~1.85% | 0.25% | BoB distorted |
| Adjusted BoB ROA | ~1.85% HDFC | ~1.10% excluding settlement | HDFC |
| Reported ROE | ~13-14% | 3.89% | BoB distorted |
| Adjusted BoB ROE | ~13-14% | ~16.6% | BoB adjusted |
| GNPA | 1.17% | 1.99% | HDFC |
| NNPA | 0.41% | 0.50% | HDFC |
| Credit cost | ~0.40% | 0.29% | BoB |
| Capital adequacy | ~19.6% | 16.30% | HDFC |
| CET1 | ~17.4% | 13.90% | HDFC |
| Credit-deposit context | Gross advances are close to total deposits | Domestic CD ratio 83.31% | BoB has more funding room |
| Late-August P/E | High teens, depending data basis | ~7-8x | BoB lower |
| Late-August P/B | ~2x | ~0.7-0.8x | BoB lower |
Bank of Baroda did not suddenly become a ₹1,278 crore quarterly earnings bank
The NMC settlement changes Q1 reported profit but does not change the recurring economics of every loan on BoB's balance sheet.
The bank agreed to settle legacy litigation connected with NMC Group for USD 600 million.
The approximately ₹5,680 crore charge was recognised in Q1 FY2027.
The payment was made in July.
Management explicitly provided the counterfactual:
Without the exceptional item, quarterly profit would have been approximately ₹5,528 crore.
Reported ROA of 0.25% would have been about 1.10%.
Reported ROE of 3.89% would have been roughly 16.6%.
Those adjusted numbers are much more useful for comparing the operating franchise.
Normalising the charge does not mean pretending it never happened
The settlement represents a real economic cost to Bank of Baroda shareholders.
Cash left the bank.
Capital was consumed.
The dispute reflected legacy risk arising from historical international operations.
Therefore the correct treatment is not:
"Ignore ₹5,680 crore because it is one-off."
The correct treatment is:
"Charge it to shareholder value once, but do not assume it recurs every quarter when estimating future banking earnings."
That distinction is fundamental to sensible bank valuation.
Underneath the settlement, Bank of Baroda's loan book grew faster than HDFC's
Global advances increased 17.4% year on year.
Domestic advances increased about 16.1%.
The growth was spread across multiple borrower categories:
- Organic retail: +18.4%.
- Agriculture: +18.7%.
- MSME: +20.3%.
- Corporate: +15.3%.
- Auto loans: +25.3%.
- Mortgages: roughly +27%.
This is stronger growth than the low-single-digit PSU-bank stereotype implies.
BoB's 37.72% CASA ratio is another overlooked strength
The domestic CASA ratio is more than five percentage points above HDFC's period-end CASA ratio.
Domestic CASA deposits increased approximately 10%.
Term deposits increased nearly 18%.
BoB's cost of deposits declined to around 4.66%, down both sequentially and year on year.
Yet margin still compressed.
That tells investors something important.
Deposit cost alone does not determine NIM.
Loan yields, asset mix, international business and repricing speed matter too.
BoB's 2.77% global NIM is the biggest quality gap against HDFC
HDFC earns materially more spread from each rupee of earning assets.
BoB's domestic NIM was approximately 2.93%.
Global NIM was 2.77%.
HDFC's earning-asset NIM was around 3.40%.
A 40-60 basis point structural spread difference is enormous when applied to multi-lakh-crore balance sheets.
This is one reason HDFC can generate substantially higher ROA despite carrying a weaker CASA ratio today.
HDFC's problem is the inverse: strong spread economics, difficult funding architecture
HDFC Bank's post-merger balance sheet is exceptionally large but remains heavily dependent on expensive term deposits.
Period-end deposits reached approximately ₹31.71 lakh crore.
CASA deposits were only around 32.3% of the total.
Time deposits grew approximately 17.4%.
Gross advances reached ₹30.61 lakh crore.
That means most of the deposit base is already deployed into lending.
Why does HDFC need deposits almost as badly as it needs borrowers?
Because loan growth without matching deposit growth eventually forces a bank toward more expensive funding.
Imagine deposits grow 10% but loans grow 20% for several years.
The gap must eventually be filled by:
- Higher-cost term deposits.
- Wholesale funding.
- Certificates of deposit.
- External borrowing.
- Slower loan growth.
HDFC's post-merger strategy therefore cannot be judged only by advance growth.
Deposit productivity is the constraint.
Bank of Baroda currently has more credit-deposit breathing room
BoB's domestic credit-deposit ratio was approximately 83.3%.
HDFC's gross advances are close to its total period-end deposits.
The definitions are not perfectly identical, so the percentages should not be mechanically ranked.
The economic message is still useful.
Bank of Baroda has more obvious room to expand credit before deposit mobilisation becomes as tight a constraint as it is for HDFC.
But more funding room is valuable only if BoB finds good loans
A low credit-deposit ratio is not automatically bullish.
If a bank deploys surplus deposits into weak corporate credit simply to raise ROE, the apparent advantage becomes future NPAs.
BoB's current growth is broad enough to reduce that concern.
The critical metrics going forward are slippages and credit cost.
Credit cost is currently exceptionally low at Bank of Baroda
Q1 credit cost was approximately 0.29%, down from about 0.55% a year earlier.
The slippage ratio was around 0.91%.
GNPA improved substantially year on year to 1.99%.
NNPA improved to 0.50%.
Those ratios are not as pristine as HDFC's.
They are strong enough that the PSU valuation can no longer be justified by saying simply, "PSU banks have bad assets."
HDFC still has the cleaner loan book
GNPA of 1.17% is materially lower than BoB's 1.99%.
NNPA is 0.41% versus 0.50%.
HDFC's absolute differences are not dramatic on net NPA.
The gross-NPA gap is more meaningful.
HDFC also carries a larger capital cushion.
This combination explains why the market assigns substantially more value to every rupee of HDFC book equity.
Why does HDFC have higher ROA while adjusted BoB ROE is higher?
ROA measures profit relative to assets. ROE measures profit relative to shareholder equity.
HDFC's normalised ROA is around 1.85%.
BoB's adjusted Q1 ROA is around 1.10%.
HDFC therefore extracts considerably more profit from its balance sheet.
But Bank of Baroda uses a smaller equity cushion relative to assets.
Adjusted ROE therefore rises to around 16.6%, compared with HDFC in the mid-teens.
Higher ROE does not necessarily mean a better bank if it comes from higher leverage.
Capital ratios explain part of that ROE gap
HDFC Bank's CET1 ratio is roughly 17.4% versus Bank of Baroda around 13.9%.
Total capital is roughly 19.6% versus 16.3%.
Both exceed regulatory requirements comfortably.
HDFC simply carries more common-equity protection.
More equity reduces financial risk.
It also mathematically reduces ROE if asset profitability stays unchanged.
The valuation difference is much larger than the operating-quality difference
Bank of Baroda trades below book value while HDFC trades around twice book.
Late-August market sources put BoB around 7-8x trailing earnings and approximately 0.7-0.8x book.
HDFC trades in the high-teens earnings multiple range on fresh market data and around 2x book.
Investors are therefore paying roughly two-and-a-half times as much for each rupee of HDFC book equity.
The central valuation question becomes:
Is HDFC's higher ROA, cleaner asset quality and franchise quality worth that premium?
Buying below book is not automatically a bargain
A bank deserves to trade below book when investors believe future ROE will remain below the cost of equity or book value itself is risky.
Bank of Baroda's adjusted ROE above 16% challenges that explanation.
If the bank can sustainably earn mid-teens ROE with low credit cost, a sub-1x P/B valuation becomes harder to explain through weak profitability alone.
The market may instead be discounting:
- PSU ownership.
- Lower structural NIM.
- Legacy litigation risk.
- International exposure.
- Lower historical consistency.
- Possibility that current credit quality represents a cyclical high point.
What does government ownership change at Bank of Baroda?
The Government of India owns roughly 64% of the bank.
That creates advantages:
- Strong depositor confidence.
- Access to government banking relationships.
- Large branch reach.
- Participation in public financial-inclusion programs.
It also creates a permanent governance discount for some investors because commercial objectives can coexist with public-policy objectives.
That structural difference will not disappear simply because one quarter's ROE improves.
HDFC has the opposite ownership structure
There is no traditional promoter shareholder controlling HDFC Bank.
The ownership base is heavily institutional.
That tends to increase expectations around governance, profitability and capital efficiency.
The market has historically rewarded HDFC with a premium multiple for precisely those attributes.
That premium is now being tested as the post-merger profitability recovery remains slower than earlier expectations.
The market performance reflects completely different disappointments
| Bull Run Market Snapshot | HDFC Bank | Bank of Baroda |
|---|---|---|
| Price, 25 Aug 2026 | ₹727.50 | ₹241.00 |
| Market capitalisation | ~₹12.56 lakh Cr | ~₹1.28 lakh Cr |
| 1-month return | -2.06% | -2.21% |
| 3-month return | -4.11% | -11.05% |
| 6-month return | -19.04% | -25.72% |
| 1-year return | -25.92% | Approximately flat |
| 52-week high | ₹1,020.50 | ₹325.50 |
| 52-week low | ₹720.39 | ₹230.81 |
HDFC is being punished for weaker-than-historical profitability and post-merger execution.
BoB is being punished despite cheap valuation because investors remain cautious about PSU-bank earnings durability and the exceptional settlement.
What would need to happen for HDFC to justify its premium again?
HDFC needs
- CASA mix to stabilise or improve.
- Term-deposit repricing to lower funding cost.
- NIM to move above the current trough.
- Retail mix to recover.
- ROE to move materially higher.
- Credit cost to remain low.
Bank of Baroda needs
- NMC settlement to remain genuinely one-off.
- 17% credit growth to remain disciplined.
- Global NIM to stabilise.
- GNPA to continue trending lower.
- Adjusted ROA to remain above 1%.
- Adjusted ROE to remain around mid-teens.
HDFC Bank vs Bank of Baroda: current conclusion
HDFC Bank is still the superior balance-sheet productivity franchise.
Its ROA is materially higher.
GNPA is materially lower.
Capital is stronger.
NIM is higher despite the current post-merger pressure.
Bank of Baroda currently has the more interesting valuation-to-growth equation.
Its loan book is growing faster, CASA is stronger, credit cost is lower, and adjusted ROE is in the mid-teens while the stock trades below book.
HDFC Bank vs Bank of Baroda FAQs
Which bank is larger?
HDFC Bank. It had approximately ₹31.71 lakh crore of period-end deposits and ₹30.61 lakh crore of gross advances at June 2026.
Which grew loans faster?
Bank of Baroda, with global advances growth of approximately 17.4% versus HDFC Bank gross-advance growth of 15.4%.
Why did BoB profit fall 72%?
The bank recognised a roughly ₹5,680 crore exceptional charge connected with settlement of legacy NMC Group litigation.
What was Bank of Baroda's adjusted profit?
Management said Q1 FY2027 profit excluding the exceptional settlement would have been approximately ₹5,528 crore.
Which bank has the higher NIM?
HDFC Bank. Its NIM was approximately 3.40% on interest-earning assets versus BoB global NIM of 2.77% and domestic NIM of 2.93%.
Which has the higher CASA ratio?
Bank of Baroda on the disclosed domestic ratio, at approximately 37.72% versus HDFC's period-end CASA ratio of 32.3%.
Which has better asset quality?
HDFC Bank, with GNPA around 1.17% versus BoB at 1.99%.
Which stock is cheaper?
Bank of Baroda. Late-August data put it around 7-8x trailing earnings and below book value, materially below HDFC's valuation.
Where can investors check the Bull Run data?
Use the HDFC Bank stock page and Bank of Baroda stock page.
Research sources
Disclaimer
This article is educational and informational only. Bank of Baroda's Q1 FY2027 reported profit, ROA and ROE were materially affected by an exceptional settlement relating to legacy NMC Group litigation. Adjusted metrics cited here use management's disclosed numbers and do not erase the real shareholder cost of the settlement. HDFC Bank's prior-year profit comparison was affected by the HDB Financial Services stake-sale gain. HDFC and BoB also disclose certain deposit, NIM and credit-deposit metrics on different domestic/global and average/period-end bases, so ratios should not be mechanically compared without those definitions. Nothing here recommends buying, selling or holding HDFC Bank, Bank of Baroda or any security. Bull Run is not a SEBI-registered Research Analyst or Investment Adviser.