[Source: Reuters]

HDFC Bank’s opens new tab shares rose nearly 2.5% on Monday, after India’s top private lender reported improved margins for a second consecutive quarter, and said it will normalise a key liquidity ratio going forward.

HDFC Bank gained the most in percentage terms on the Nifty Bank index (.NSEBANK), opens new tab, which was up 0.1%.

The bank said it aims to bring down its loan-to-deposit ratio (LDR) in the coming quarters as deposits will grow faster than loans.

LDR is an important metric for banks as it helps assess their liquidity position by gauging whether they have enough deposits to fund loan growth. The ratio has remained elevated since the merger.

HDFC bank’s standalone net profit for the June quarter beat analysts’ estimates and its core net interest margin (NIM) – a metric measuring the bank’s profitability – on total assets rose to 3.47% from 3.44% in the previous quarter.

HDFC Bank had begun seeing margin pressure following its merger with parent Housing Development Finance Corp (HDFC) in July last year on HDFC Ltd’s higher borrowing costs and lower-yielding loan book, raising concerns among analysts and investors.

However, the lender has seen NIM tick up in the last two quarters, which Jefferies said reflects repayment of HDFC Ltd’s higher cost liabilities and a fall in the share of low-yielding corporate loans.

HDFC Bank has lost nearly 4% in 2024 compared to a 12.5% rise in Nifty 50 and an 8% gain in the bank index.