ICICI Bank and HDFC Bank remain among the most closely watched private-sector banking stocks, with their September-quarter results offering investors fresh insights into earnings growth, margins, asset quality and future profitability.
While both lenders reported improvements in asset quality, their performance differed on several key metrics, with ICICI Bank delivering faster profit growth and stronger margins, while HDFC Bank continued to report higher absolute earnings. Experts remain positive on both stocks, although their investment arguments differ, with ICICI Bank’s growth momentum contrasting with HDFC Bank’s potential recovery and valuation appeal.
Both stocks closed lower on Monday, with ICICI Bank declining 1.1% to ₹1,382 and HDFC Bank falling 2.3% to ₹712. The Nifty dropped 1.11%, while the Bank Nifty declined 0.6%.
HDFC Bank has been giving weak returns in recent times, down 3% in 1 month, 13% in 3 months, 11% in 6 months and 29% in the last 1 year.
Meanwhile, ICICI Bank has been mixed. It has added 3% in 1 month but us down 4.4% in 3 months. Meanwhile, the lender advanced 2.5% in 6 months but declined 4% in the last 1 year.
ICICI Bank vs HDFC Bank Q2 results: Profit, NII, margins and asset quality
HDFC Bank reported standalone net profit of ₹19,510 crore for the September quarter, up 4.7% year-on-year. ICICI Bank’s net profit increased 20.1% to ₹14,843 crore from ₹12,359 crore a year earlier.
ICICI Bank also outperformed HDFC Bank on net interest income (NII) growth. Its NII rose 17.7% year-on-year to ₹25,339 crore, compared with HDFC Bank’s 9.7% increase to ₹34,619 crore.
Both lenders experienced pressure on net interest margins (NIMs), partly because of foreign-currency deposits mobilised under the Reserve Bank of India’s FCNR(B) swap window. ICICI Bank’s NIM declined to 4.18% from 4.36% in the June quarter and 4.30% a year earlier. HDFC Bank reported a NIM of 3.32% on interest-earning assets and 3.16% on total assets.
Asset quality improved at both banks. HDFC Bank’s gross non-performing asset (NPA) ratio declined to 1.11% from 1.17% in the June quarter, while its net NPA ratio fell to 0.37% from 0.41%. ICICI Bank’s gross NPA ratio improved to 1.2% from 1.38%, and its net NPA ratio declined to 0.30% from 0.35%.
HDFC Bank vs ICICI Bank: Which stock should you buy?
ICICI Bank and HDFC Bank have both received BUY ratings from leading brokerages after their September-quarter results, but the investment case for each lender is different. ICICI Bank has the advantage of stronger earnings growth, improving asset quality and higher return ratios, while HDFC Bank offers a potential recovery opportunity as it works to improve margins.
ICICI Bank’s stronger earnings momentum underpins its investment case. Anand Rathi retained its BUY rating with a sum-of-the-parts (SOTP) target price of ₹1,752, implying 27% upside. Motilal Oswal also maintained a BUY rating, with a target price of ₹1,750, indicating similar upside potential.
Both brokerages highlighted the bank’s ability to deliver healthy credit growth alongside strong profitability and improving asset quality. Anand Rathi said earnings were around 4% ahead of its and consensus estimates, supported by core operating performance and lower provisions. It also pointed to ICICI Bank’s 16.6% return on equity (RoE), which remained well ahead of peers, as a reason for the lender to command a valuation premium.
Anand Rathi said, “Earnings were ~4% ahead of our and consensus estimates, driven by better core operating performance and lower provisions. Credit growth accelerated to 30.0% y/y (~24.1% adjusted for FCNR) and deposits grew 27.1% y/y with CASA growth lagging overall deposit.”
Motilal Oswal’s positive view was similarly rooted in strong core earnings and asset quality. The brokerage expects ICICI Bank to deliver a return on assets of 2.34% in FY27 and 2.38% in FY28. Although FCNR(B) deposit mobilisation is expected to weigh on margins in the near term, it sees scope for improvement from the fourth quarter of FY27. Its view is also supported by a conservative credit cost guidance of 50 basis points and a contingency buffer of ₹13,100 crore, equivalent to 0.7% of loans.
Motilal Oswal said, “ICICIBC reported yet another strong quarter with exceptional business growth, strong core profits and robust asset quality metrics. NIMs declined by 18bp QoQ (10bp QoQ decline adjusted for interest on IT refund in 1Q). NIMs are expected to improve from 4QFY27 after moderation in 3QFY27 once the full impact of FCNR (B) is reflected.”
HDFC Bank’s investment case, meanwhile, rests on a gradual recovery in margins and profitability. Anand Rathi maintained a BUY rating with a target price of ₹966, implying 36% upside, while Motilal Oswal set a target of ₹925, indicating 30% upside.
Anand Rathi noted that HDFC Bank’s credit growth continued to trail that of ICICI Bank, Axis Bank and Kotak Mahindra Bank. Margin pressure from FCNR(B) flows and slower growth in current account and savings account (CASA) deposits relative to loans could also delay the bank’s efforts to narrow its funding-cost disadvantage. The brokerage does not expect loan growth or RoE to sustainably exceed 15% over the medium term. It also flagged the possibility of senior executive exits causing business disruption, although the appointment of Anup Bagchi as managing director has eased some leadership uncertainty.
Motilal Oswal was more focused on the medium-term improvement potential. It expects the retirement of high-cost borrowings and operating leverage to support a gradual recovery in profitability and return ratios.
Motilal Oswal said, “HDFCB reported a largely in-line quarter, supported by healthy business growth and strong operating profits, although provisions were elevated. NIMs on total assets contracted by 10bp QoQ to 3.16%, while the bank has guided for NIMs to be on an upward trajectory from hereon.”
Which stock should you buy? ICICI Bank appears better placed for investors seeking stronger current earnings momentum, higher return ratios and consistently improving asset quality. HDFC Bank offers a potentially attractive recovery trade. Both remain BUY-rated stocks, but ICICI Bank’s case is supported by stronger current operating performance, while HDFC Bank’s rests more heavily on a future recovery.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
