HDFC Bank vs Federal Bank (2026): Scale, NIM, ROA, Growth & Which Is Better?
HDFC Bank versus Federal Bank is not the obvious mega-cap-versus-mid-cap story investors might expect.
Federal Bank is delivering the faster quarter.
NII increased 26.06%.
Profit increased 36.57%.
NIM expanded 39 basis points year on year.
Net NPA fell to 0.18%.
HDFC Bank's Q1 looks slower.
NII increased 6.7%.
Reported PAT increased 5%.
NIM remains under pressure.
Yet HDFC Bank still produces 1.85% ROA versus Federal Bank at 1.22%, operates at a 39.2% cost-to-income ratio versus Federal's 52.5%, and has much larger capital buffers.
Then the valuation produces the surprise.
HDFC Bank trades at roughly 14x earnings and 1.85x book.
Federal Bank trades around 18.15x earnings and 2.14x book.
The mid-cap growth bank is currently more expensive than the mega-bank on both P/E and P/B.
The growth-premium test
Higher ROA, lower cost-to-income, lower GNPA, enormous scale and stronger capital—but slower current earnings growth and leadership uncertainty.
NII +26%, PAT +37%, NIM expanding, CASA growing quickly and NNPA at 0.18%—but ROA and operating efficiency remain below HDFC.
The decision is whether Federal's superior growth trajectory is valuable enough to justify paying a higher multiple than HDFC Bank for a bank that still earns materially lower returns on assets.
HDFC Bank vs Federal Bank: Q1 FY2027 scoreboard
| Metric | HDFC Bank | Federal Bank | Current Reading |
|---|---|---|---|
| Q1 PAT | ₹19,060 Cr | ₹1,176.9 Cr | HDFC scale |
| Reported PAT growth | +5.0% | +36.57% | Federal |
| Adjusted HDFC PAT growth | ~+9.8% | +36.57% | Federal |
| NII | ₹33,535 Cr | ₹2,945.9 Cr | HDFC scale |
| NII growth | +6.7% | +26.06% | Federal |
| Deposits | ₹31.71 lakh Cr | ₹3.20 lakh Cr | HDFC scale |
| Deposit growth | +14.7% | +11.37% | HDFC |
| Gross advances | ₹30.61 lakh Cr | ₹2.81 lakh Cr | HDFC scale |
| Advance growth | +15.4% | +14.94% | Effectively tied |
| CASA ratio | 32.3% | 32.23% | Almost exact tie |
| NIM on total assets | 3.26% | Not same definition | Do not compare mechanically |
| NIM on earning assets / reported NIM | ~3.40% | 3.33% | HDFC slightly |
| ROA | 1.85% | 1.22% | HDFC |
| Federal ROE | Higher absolute franchise profitability | 12.01% | HDFC retains stronger return profile |
| Cost-to-income | 39.2% | 52.50% | HDFC |
| GNPA | 1.17% | 1.52% | HDFC |
| NNPA | 0.41% | 0.18% | Federal |
| Federal PCR excl. technical write-offs | Not directly comparable here | 87.37% | Federal coverage |
| Credit cost | 0.40% | 0.41% | Exact economic tie |
| Fresh slippage ratio | Low | 0.61% | Both benign |
| Capital adequacy | 19.6% | 16.97% | HDFC |
| Tier 1 | 17.8% | 15.89% | HDFC |
| CET1 | 17.4% | Strong Tier 1 base | HDFC |
| 28 Aug P/E | 14.04x | 18.15x | HDFC cheaper |
| 28 Aug P/B | 1.85x | 2.14x | HDFC cheaper |
The first comparison is almost absurd in scale
HDFC Bank deposits:
₹31.71 lakh crore.
Federal Bank:
₹3.20 lakh crore.
HDFC's deposit franchise is almost ten times larger.
Gross advances are approximately ₹30.61 lakh crore versus Federal Bank around ₹2.81 lakh crore.
This is why the comparison cannot be reduced to percentage growth.
A 15% growth rate at HDFC creates far more incremental credit in rupees
Federal Bank's percentage growth can look similar or faster.
HDFC's balance sheet is so much larger that even mid-teens growth represents enormous incremental loan deployment.
A mature mega-bank sustaining 15.4% gross-advance growth is therefore operating at a very different scale challenge from a mid-cap bank growing around 15%.
Federal Bank wins the current earnings-momentum contest decisively
NII:
+26.06%.
PAT:
+36.57%.
Fee income:
+21.71%.
HDFC Bank NII increased only 6.7%.
Reported PAT increased around 5%.
On pure current growth momentum, Federal wins.
HDFC's reported 5% PAT growth understates the recurring comparison
The prior-year quarter included:
- gain from partial divestment of HDB Financial Services.
- one-off provisions.
- tax credits.
HDFC Bank disclosed that after adjusting for those prior-year items, Q1 FY2027 PAT increased approximately 9.8%.
That is still much slower than Federal Bank.
But it provides a cleaner recurring benchmark than the headline 5%.
Federal's profit growth is unusually high quality this quarter
The bank explicitly highlighted that treasury income remained subdued.
Despite that, profit grew almost 37%.
NII grew 26%.
This means the quarter was driven primarily by the core banking franchise rather than market gains.
That is precisely the type of earnings growth investors normally pay a premium for.
The margin story favours Federal on direction, HDFC on current level
Federal NIM increased 39 basis points year on year to 3.33%.
Cost of deposits declined 57 basis points to 5.21%.
Federal therefore has clear positive margin momentum.
HDFC Bank's NIM needs definition discipline
HDFC disclosed:
- 3.26% NIM on total assets.
- approximately 3.40% NIM on interest-earning assets.
Federal's 3.33% should not be compared mechanically with HDFC's 3.26% total-assets measure.
The earning-asset measure is the closer conceptual comparison.
On that basis, HDFC remains slightly ahead.
But HDFC's margin direction has been weak
NIM on total assets fell from approximately 3.38% in the March quarter to 3.26% in June.
This is one of the main reasons HDFC Bank's current share-price narrative has been difficult despite strong balance-sheet growth.
The bank needs post-merger funding costs and asset yields to normalize.
Federal Bank is moving in the opposite direction
NIM expanded from 2.94% a year earlier to 3.33%.
The bank benefited from:
- lower deposit costs.
- stronger CASA growth.
- higher-yield granular segments.
- improving loan mix.
This is the strongest structural argument for Federal's premium valuation.
CASA creates an unusual result: the banks are almost exactly tied
HDFC Bank:
32.3%.
Federal Bank:
32.23%.
The ratios are effectively identical.
That means HDFC's better current profitability cannot simply be explained by having a dramatically superior CASA mix.
Federal's CASA growth is much stronger than its current ratio suggests
CASA balances increased approximately 18.26% year on year.
Total deposits increased only 11.37%.
This is exactly the mix shift a bank wants:
low-cost deposits growing faster than the overall deposit franchise.
HDFC's CASA growth was slower than total deposit growth
CASA deposits increased around 9.4%.
Total deposits increased 14.7%.
Time deposits increased more quickly.
This helps explain why HDFC's post-merger funding normalization remains a key profitability issue.
ROA is where HDFC's quality advantage becomes undeniable
HDFC Bank:
1.85%.
Federal Bank:
1.22%.
A 63-basis-point gap is enormous in banking.
HDFC currently earns roughly 52% more profit per rupee of assets on a relative basis.
This is the metric Federal's growth premium eventually needs to close
Federal can grow profit 30%-plus for several quarters.
But if ROA remains near 1.2% while HDFC sustains 1.8%-plus, the mega-bank continues to generate substantially more efficient asset-level economics.
A higher growth rate does not automatically mean a better business.
Federal's ROA improvement is still significant
ROA increased from approximately 1.00% a year earlier to 1.22%.
ROE improved to 12.01%.
The bank is therefore not merely growing the balance sheet.
It is simultaneously improving the returns generated by that balance sheet.
That is exactly what a successful mid-cap banking compounder should do.
Operating efficiency creates HDFC's largest structural advantage
Cost-to-income:
HDFC Bank 39.2%.
Federal Bank 52.5%.
The thirteen-percentage-point gap is enormous.
For every ₹100 of operating income, the economics look very different
HDFC spends roughly ₹39 on operating costs before provisions.
Federal spends around ₹52.5.
This efficiency gap explains a meaningful part of HDFC's ROA superiority.
Federal's growth gives it operating-leverage potential, but HDFC already runs a much more efficient machine.
Federal's cost-to-income ratio is improving
The ratio improved approximately 239 basis points year on year.
That matters because the bank is simultaneously absorbing wage revisions and expanding the franchise.
If Federal can move the ratio sustainably below 50%, ROA convergence becomes more credible.
Federal does not need HDFC-level 39% efficiency
A move from 52.5% toward 48%-50% would already release meaningful operating profit.
Combined with a 3.3%+ NIM, that could move ROA materially above today's 1.22%.
This is the operating-leverage path embedded in Federal Bank's higher valuation.
Asset quality produces a split decision
GNPA:
HDFC Bank 1.17%.
Federal Bank 1.52%.
HDFC has the cleaner gross recognised book.
NNPA reverses the ranking.
Federal Bank's 0.18% NNPA is exceptional
HDFC Bank NNPA:
0.41%.
Federal Bank:
0.18%.
Federal's provision coverage excluding technical write-offs strengthened to approximately 87.37%.
Including technical write-offs, coverage was even higher.
Federal's fresh slippage trend is also improving
Fresh slippages fell almost 38% year on year to approximately ₹409 crore.
The annualised slippage ratio improved to 0.61%.
This is especially encouraging because the bank is growing higher-yield segments such as:
- gold loans.
- commercial banking.
- vehicle finance.
- LAP.
- credit cards.
Credit cost is almost an exact tie
HDFC Bank:
0.40%.
Federal Bank:
0.41%.
This is useful because it removes another potential explanation for the ROA gap.
HDFC is not producing higher ROA simply because it provisioned less in Q1.
The ROA advantage comes more from the underlying operating architecture
HDFC combines:
- slightly stronger earning-asset NIM.
- much lower operating-cost intensity.
- huge scale.
- strong asset quality.
to generate the higher final asset return.
Capital also favours HDFC Bank
Total CAR:
HDFC 19.6%.
Federal 16.97%.
Tier 1:
HDFC 17.8%.
Federal 15.89%.
HDFC CET1 is approximately 17.4%.
Federal's capital is still comfortably adequate
A 16.97% total capital ratio provides room for continued mid-teens balance-sheet growth.
The bank has also been generating capital internally through profits.
There is no obvious near-term requirement to raise equity merely to sustain current growth.
HDFC's excess capital matters more because of its scale
A mega-bank carrying a 17%+ CET1 ratio while growing gross advances 15% has substantial capacity to support credit expansion.
This is one reason the current valuation compression deserves attention.
HDFC Bank now has a fresh risk that is not visible in Q1 ratios: CEO succession
On August 29, 2026, HDFC Bank disclosed that Managing Director and CEO Sashidhar Jagdishan would not seek reappointment.
His current term ends on October 26, 2026.
The board has said it will fast-track the successor-selection process.
This is now a live investment variable rather than background noise.
Why the succession matters
HDFC Bank is navigating:
- post-merger balance-sheet normalization.
- NIM pressure.
- funding-mix optimization.
- governance scrutiny.
- a sharp share-price derating.
A new CEO will inherit one of India's strongest banking franchises but also one of its largest execution agendas.
Leadership uncertainty can explain part of HDFC's valuation compression
Value Research's August 28 snapshot placed HDFC Bank at approximately:
- 14.04x P/E.
- 1.85x P/B.
Those multiples are well below the valuation levels investors historically associated with HDFC Bank.
The lower valuation therefore reflects not just slower growth, but also expectations around management transition and post-merger execution.
Federal Bank has a very different management setup
Federal Bank is led by KVS Manian, who is still in the earlier stages of executing a strategy focused on:
- higher-yield chosen segments.
- stronger CASA and NR deposits.
- better operating efficiency.
- higher ROA.
The current quarter provides strong evidence that this operating strategy is working.
This turns HDFC vs Federal into a rare valuation inversion
The larger, higher-ROA bank is cheaper.
The smaller, lower-ROA bank is more expensive.
August 28 valuation:
- HDFC Bank P/E: 14.04x.
- Federal Bank P/E: 18.15x.
- HDFC Bank P/B: 1.85x.
- Federal Bank P/B: 2.14x.
What is Federal investors' premium paying for?
Primarily:
- 26% NII growth.
- 37% profit growth.
- 39-basis-point NIM expansion.
- 18% CASA growth.
- 0.18% NNPA.
- ROA improvement.
The market is capitalising future profitability convergence.
What is HDFC's discount compensating investors for?
Primarily:
- margin pressure.
- slower earnings growth.
- post-merger funding normalization.
- leadership transition.
- governance uncertainty.
- weak recent share-price momentum.
The question is whether these issues are temporary enough for 14x earnings to be attractive.
Federal's 2.14x book valuation requires more future ROE
Federal currently produces 12.01% ROE.
A bank trading above 2x book generally needs either:
- materially higher sustainable ROE.
- very fast book-value growth.
- or both.
Federal's current earnings momentum creates a plausible path.
But the valuation leaves less room for execution disappointment.
Federal's cleanest rerating confirmation would be ROA above 1.4%
If the bank can combine:
- NIM around 3.3%-3.4%.
- cost-to-income below 50%.
- credit cost below 0.6%.
- mid-teens advances growth.
ROA can continue converging toward stronger private-bank peers.
That would make the higher P/B more defensible.
HDFC does not need faster growth than Federal to win the comparison
HDFC's valuation thesis is simpler.
If the bank can:
- stabilise NIM.
- keep gross advances growing low-to-mid teens.
- maintain sub-0.5% credit cost.
- preserve 1.8% or better ROA.
- complete CEO succession without disruption.
the current lower multiple can do much of the work.
HDFC's challenge is therefore expectation repair rather than business repair
The bank does not have a bad balance sheet.
It does not have an NPA crisis.
It does not have insufficient capital.
It has a profitability-normalization and leadership-confidence problem.
Those are significant—but fundamentally different from a banking solvency problem.
Federal's challenge is expectation delivery
The market already rewards Federal's acceleration with a higher multiple.
The bank therefore needs to continue showing:
- NIM expansion.
- lower operating-cost intensity.
- clean asset quality.
- ROA progression.
A simple return to low-teens profit growth could make 18x earnings look much less comfortable.
Bull Run's August 25 market snapshot captures the contrast in momentum
| Bull Run Snapshot — 25 Aug 2026 | HDFC Bank | Federal Bank |
|---|---|---|
| Price | ₹727.50 | ₹346.95 |
| 1-month return | -2.06% | -2.07% |
| 3-month return | -4.11% | +20.09% |
| 6-month return | -19.04% | +15.84% |
| 52-week high | ₹1,020.50 | ₹371.70 |
| 52-week low | ₹720.39 | ₹188.40 |
| RSI 14 | Not available in snapshot | 41.81 |
| Dividend yield | 1.59% | 0.37% |
| Bull Run Score | 38.4/100 | 43.9/100 |
HDFC's dated snapshot places the stock close to its 52-week low, while Federal remains far above its low after a powerful medium-term rerating.
That price positioning is consistent with the valuation inversion.
Federal's strong three- and six-month returns mean the growth story is no longer undiscovered
A 20% three-month gain and roughly 16% six-month gain demonstrate that investors have already recognized the earnings acceleration.
Future upside increasingly requires continued delivery rather than simple discovery.
HDFC's weak momentum means expectations are much lower
The stock had fallen around 19% over six months in Bull Run's August 25 snapshot.
The share price then faced additional leadership uncertainty at the end of August.
That creates a setup where operational stability can itself become a catalyst.
What can break each thesis?
HDFC Bank
- NIM keeps falling after the post-merger compression.
- CEO succession becomes prolonged or disruptive.
- Deposit growth falls behind credit growth.
- ROA declines materially below the current 1.85% level.
- Governance concerns continue to outweigh otherwise strong fundamentals.
Federal Bank
- NIM expansion stalls or reverses.
- Cost-to-income remains above 50% for too long.
- Higher-yield segment growth produces delayed NPAs.
- ROA fails to move materially above 1.2%.
- Profit growth normalises sharply while the stock remains above 2x book.
HDFC Bank vs Federal Bank: current conclusion
Federal Bank has the stronger current growth story.
HDFC Bank has the stronger current economics and, unusually, the cheaper valuation.
HDFC Bank vs Federal Bank FAQs
Which bank is larger?
HDFC Bank by roughly ten times on deposits and advances.
Which bank is growing earnings faster?
Federal Bank by a wide margin in Q1 FY2027.
Which bank is growing loans faster?
They are effectively tied: HDFC Bank gross advances grew approximately 15.4% and Federal Bank gross advances around 14.94%.
Which has higher CASA?
They are almost exactly tied at approximately 32.3%.
Which has higher NIM?
On the closer earning-asset comparison, HDFC Bank is around 3.40% versus Federal Bank at 3.33%. HDFC's 3.26% total-assets NIM should not be compared mechanically with Federal's reported definition.
Which has higher ROA?
HDFC Bank at approximately 1.85% versus Federal Bank at 1.22%.
Which has lower GNPA?
HDFC Bank at 1.17% versus Federal Bank at 1.52%.
Which has lower NNPA?
Federal Bank at only 0.18% versus HDFC Bank at 0.41%.
Which has lower credit cost?
They are effectively tied: HDFC Bank 0.40% and Federal Bank 0.41%.
Which has better operating efficiency?
HDFC Bank by a large margin, with cost-to-income around 39.2% versus Federal Bank at 52.5%.
Which stock is cheaper?
HDFC Bank on both late-August P/E and P/B.
Is HDFC Bank changing CEO?
Yes. Sashidhar Jagdishan is due to retire on October 26, 2026 after deciding not to seek reappointment. The board is fast-tracking succession.
Where can investors compare them on Bull Run?
Use the HDFC Bank stock page and Federal Bank stock page.
Research sources
Disclaimer
This article is educational and informational only. HDFC Bank reports NIM on both total-assets and interest-earning-assets bases; Federal Bank's reported NIM should therefore not be compared mechanically with HDFC's 3.26% total-assets figure. HDFC Bank's reported Q1 FY2027 PAT growth of 5% is affected by prior-year transaction gains, one-off provisions and tax credits; the bank disclosed approximately 9.8% adjusted year-on-year growth after normalising those prior-year items. HDFC Bank's CEO succession is unresolved as of August 31, 2026 even though Sashidhar Jagdishan's retirement date has been announced. Federal Bank's recent NII and PAT growth rates are unusually strong and should not automatically be extrapolated indefinitely. Credit losses from rapidly growing loan segments can emerge with a lag. Bull Run price and technical data is dated August 25, 2026; external valuation multiples are dated August 28. Nothing here recommends buying, selling or holding HDFC Bank, Federal Bank or any security. Bull Run is not a SEBI-registered Research Analyst or Investment Adviser.