HDFC Bank vs ICICI Bank: Bernstein shares note on how financials stack up now

Bernstein, in its latest report, said HDFC Bank Ltd's sharp de-rating over the last two years has left the stock trading at a meaningful discount to both its own history and ICICI Bank Ltd, partly reflecting the lack of clarity on its operating performance. The Q2 FY27 results reinforced ICICI Bank's lead across most key metrics, with the bank extending its advantage on growth, funding and profitability.

ICICI Bank continued to deliver industry-leading loan growth and moved ahead on deposit growth during the quarter, while HDFC Bank remained constrained by weaker lending momentum and lower yields. While underlying margin compression was broadly similar across both banks, ICICI retained its advantage on headline profitability and earnings growth.

With the operating gap arguably reflected in valuations, Bernstein said the debate has now shifted to management changes at HDFC Bank and whether they can drive an improvement in strategy and execution, or at least better communication.

Loans: ICICI reported robust loan growth of around 30 per cent year-on-year (YoY), supported by continued strength in business banking, corporate lending and an ongoing recovery in retail lending, especially non-mortgage retail. HDFC Bank's loan growth remained broadly stable at around 16 per cent YoY, with healthy momentum in business banking and corporate lending offset by continued weakness in mortgages and slower retail growth.

Deposits: ICICI moved ahead of HDFC Bank on both average and period-end deposit growth during the quarter, aided by healthy FCNR mobilisation and stronger growth in current account and term deposits. The bank also maintained its lead in retail deposit growth and continued to report a superior liquidity profile, while HDFC Bank continued to maintain an advantage in savings account deposit growth.

Margins: Underlying pressure remains similar, but ICICI retains a yield advantage: While ICICI reported a larger headline NIM (Net Interest Margin) decline during the quarter, underlying margin compression was broadly similar across the two banks after adjusting for one-offs. Nonetheless, ICICI continued to retain an advantage on headline margin metrics, supported by superior loan yield performance.

Costs: HDFC retains cost discipline; ICICI continues to invest for growth: HDFC maintained tighter control over operating expenses, with opex growth of around 6 per cent YoY versus around 9 per cent for ICICI. The higher expense growth at ICICI continues to be driven by investments in branch expansion and franchise building.

Asset quality: Asset quality remained healthy for both banks, with GNPA (Gross Non-performing Asset) ratios declining sequentially and credit costs remaining benign. The quarter saw no signs of any meaningful deterioration across major portfolios for either bank, the global brokerage noted.

Profitability: ICICI maintains a meaningful lead on returns: Despite treasury-related pressures during the quarter, Bernstein said ICICI continued to outperform HDFC across key profitability metrics, including RoA, RoE and RoRWA. While the core income gap narrowed from Q1 FY27 levels, it remained substantial at around 90 basis points (bps), supporting ICICI's continued advantage in earnings growth and overall profitability.