HDFC Bank Vs ICICI Bank: A Tale Of Two Futures

As the September quarter earnings season slowly unfolds, India's top two private lenders - HDFC Bank and ICICI Bank - have put out contrasting pictures in the quarter gone by.

While both lenders showed signs of strength, their paths diverged due to at least six reasons.

HDFC Bank, for its part, saw its bottom line get a booster dose from one-off treasury gains, with the lender reporting an 11% profit growth in the September quarter.

ICICI Bank had a slower growth in contrast, but the operational performance of the bank appeared healthier on paper.

Let's put this into perspective. ICICI Bank saw a 68% year-on-year decline in treasury income, which impacted its overall profit growth. This is considerably lower when compared to HDFC Bank.

However, ICICI edged out HDFC Bank in terms of loan expansion, which stood at 10.6% vs HDFC's 9.9%. However, the latter registered higher deposit growth at 12% vs ICICI's 9%.

ICICI Bank enjoys a more comfortable loan-to-deposit ratio of 87% compared to HDFC Bank's 98%. And this is where the crux of the issue lies.

While an LDR of 98% is certainly an improvement from the 110% levels post the merger, it must be noted that HDFC Bank's LDR has actually increased compared to the June quarter (96%).

An increasing LDR doesn't bode well for HDFC Bank, at least for the near-term as it essentially caps off loan growth prospects, forcing the lender to chase higher deposits in the days to come.

Moving on, HDFC Bank saw its core net interest margin drop by 8 basis points quarter-on-quarter to 3.49% while CASA (Current Account Savings Account) ratio remains middling in the mid-30s.

ICICI Bank, in stark contrast, appears to be on a much more stable footing. Its stronger CASA franchise, standing at 39.2%, provides a more robust base of low-cost funds.

This allowed its NIM to remain resilient and at a much healthier level of 4.3%, dipping only 4 bps sequentially. Crumbs are still crumbs.

Let's talk about asset quality. Both lenders posted positive metrics when it comes to asset quality, but there is some nuance to the story behind the numbers.

HDFC Bank's asset quality improvement was driven by a single, large corporate upgrade, which although positive, can skew the broader picture, especially against an ICICI Bank that witnessed a more balanced and organic asset quality improvement.

As for the road ahead, ICICI Bank forecasts an operationally better period during the second half of FY26 whereas HDFC Bank is gearing up for a growth push, owing to LDR pressures.