How Market Favourite HDFC Bank Became The Worst-Performing Bank Stock of Nifty Bank

[00:00:00]HDFC Bank that you should be looking at very closely. Slow growth margin pressures as well as governance concerns raise questions over once market's favorite HDFC Bank. Let's also talk about what is happening in terms of HDFC Bank losing its sheen and some of the factors to consider when it comes to that.

[00:00:17]>> Yes, if you look at HDFC Bank so far in 2026, the share prices are down nearly 23% and this is the worst performing banking stock in the Nifty Bank Index and also the worst start that HDFC Bank would have seen since 2008. So, if you look at this chart, in 2008 the stock was down nearly 42%. Since then, only twice the stock has given a negative return in a calendar year and that was in 2011 and 2013. But even that time it was just minus 9% and minus 2%. Apart from that, all the years the stock has been giving a positive return. But in 2026 so far, 7 months out, we are down 23% the worst possible start that HDFC Bank could see since 2008. Now, how important is this for any retail shareholders? Now, HDFC Bank is 100% owned by public. There are close to 45.3 lakh shareholders in HDFC Bank of which 44.4 lakh are individual, which means that these are the non-mutual fund holding. Now, if you look at the mutual funds, they own close to 30.6% stake and 59 mutual funds or AMCs via various schemes hold stake in HDFC Bank. And this is the most interesting play here.

[00:01:30]Now, the value of this mutual fund holding is at close to 3.1 lakh crore rupees, which is nearly 8.3% of the total equity oriented scheme AUM that the mutual fund industry has and nearly 3.8% of the total mutual fund industry asset under management. So, that's the exposure towards one single stock of the entire mutual fund industry. Hence, this 23% fall in the HDFC Bank share prices could be a pain point for all retail shareholders. Now, why is HDFC losing its sheen? Now, the grow loan growth has been moderated and apart from that, the funding mix change is also impacting the company's profitability. There has been a continuous decline in a low deposit low-cost deposits. Margins have been range bound, in fact, on a declining trend and also the yields on asset has also been on a downward trend for the last five consecutive quarters. Apart from that, there have been govern governance concerns govern governance concerns post the uh chairman exit and also there is a delay in clarity on the CEO reappointment. Now, given the fact that there is still no clarity about this CEO appointment, uh let's see how HDFC Bank has performed under Sashidhar.

[00:02:38]Now, for this we're just giving a context of ICICI Bank performance as well during that time period. So, over FY '21 to FY '26, if you see HDFC Bank's performance adjusted for the merger that was announced back then, the NII growth CAGR growth has been around 10-odd percent while that of ICICI Bank is 18%.

[00:02:57]PAT growth of HDFC Bank is 12% while that of ICICI Bank is more than double at 25%. Advances or total loan growth was 12% for HDFC Bank, 17% for ICICI Bank. The net interest margin, the bigger pain point for HDFC Bank has been the net interest margin decline and that has gone down by around 70 basis points while ICICI Bank's net interest margin has increased by 63 basis point. The net NPL change, that is a net NPA, that has come down by 23 basis points, which is good, but for ICICI Bank, it has come down by around 81 basis points. For return on asset change, that has come down by 10 bips while that of ICICI Bank has increased by around 104 basis points. And lastly, the ROE or the return on equity for HDFC Bank has declined by around 270 basis points over FY '21 to FY '26 while that of ICICI Bank has increased by around 580 basis points. So, not that of great performance that we have seen from HDFC Bank over FY21 to FY26 when compared to its peer ICICI Bank.

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