HDFC Bank and ICICI Bank are set to report third-quarter earnings on Jan. 16, with investors expected to focus on loan growth, margins and asset quality as India's two largest private-sector lenders pursue different growth strategies.
Both banks remain among the strongest franchises in the sector, supported by healthy balance sheets and stable asset quality. However, recent business trends suggest differences in growth momentum and profitability.
The upcoming results are likely to provide further insight into how each lender is positioned for FY26 and beyond.
Growth Trends
HDFC Bank's latest business update showed gross advances growing 11.9% year on year and about 2.7% sequentially.
Total deposits increased 11.5% to Rs 28.60 lakh crore, while the bank's loan-to-deposit ratio fell below 100%. Management has indicated that the balance-sheet position supports future growth.
ICICI Bank has continued to grow faster.
The bank delivered a 15% compound annual growth rate in loans between FY23 and FY25. During the second quarter, domestic loans increased 10.6% year on year and 3.3% sequentially, while retail loans rose 6.6% year on year and 2.6% quarter on quarter.
Analysts at BofA Securities expect ICICI Bank's loan growth to improve further in the third quarter.
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Margin Outlook
Margin performance remains a key focus for investors as banks navigate changing interest-rate conditions.
HDFC Bank's management has indicated that net interest margins could benefit from deposit repricing in the second half of the financial year.
InCred Equities expects margins to stabilise at levels above earlier expectations, which could support earnings growth.
ICICI Bank has demonstrated greater margin stability.
Motilal Oswal Financial Services expects net interest margins to remain at about 4.4% in FY26 and stay within a 4.4%-4.5% range through FY28.
The bank's cost of deposits declined to 4.64% in the second quarter from 4.85% in the previous quarter, supporting profitability.
Asset Quality
Asset quality remains a strength for both lenders.
HDFC Bank reported a gross non-performing asset ratio of 1.24% in the second quarter, while ICICI Bank reported 1.58%.
YES Securities expects HDFC Bank's asset-quality metrics to improve sequentially, supported by lower slippages and provisions.
For ICICI Bank, Moody's expects overall asset quality to remain stronger than the industry average despite the possibility of some seasonal stress in agricultural lending.
ICICI Bank's net NPA additions declined to Rs 13.86 billion in the second quarter from Rs 30.34 billion in the previous quarter.
Recoveries and upgrades totalled Rs 36.48 billion, while the net NPA ratio improved to 0.39% from 0.41%.
Valuation Comparison
The valuation gap between the two banks remains relatively narrow.
HDFC Bank trades at a trailing price-to-book multiple of 2.65 times, below its 10-year average of 3.72 times.
ICICI Bank trades at 2.99 times book value, compared with its historical average of 2.51 times.
Based on consensus analyst estimates, HDFC Bank offers potential upside of about 24.5%, while ICICI Bank trades at a discount of roughly 21% to target prices.
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Different Paths
The two banks are pursuing different approaches to growth.
HDFC Bank continues to focus on strengthening its deposit franchise and improving balance-sheet efficiency following the merger integration process.
The bank has also invested in distribution and technology. Home-loan turnaround times have fallen to two days for salaried customers and three days for self-employed borrowers.
ICICI Bank has focused on maintaining stronger growth momentum while preserving profitability and asset quality.
The strategy has helped the lender outpace many peers in loan growth while keeping margins relatively stable.
Investment View
Ahead of third-quarter earnings, both banks remain well positioned within the private banking sector.
HDFC Bank offers a story centred on deposit growth, balance-sheet optimisation and potential improvement in profitability over the medium term.
ICICI Bank continues to demonstrate stronger growth momentum and stable margins.
The upcoming earnings season may provide greater clarity on whether the growth gap between the two lenders is narrowing or widening, and how each bank plans to balance expansion with profitability.
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.
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