AdBlocker Detected !

AdBlock Detected Icon

Dear Visitor, It Seems That You Are Using An Ad Blocker / VPN / Proxy. Please Consider Disabling It To Support Our Website And Continue Enjoying Our Content For Free.

Note : Brave Browser Is Not Supported On Our Website. Please Use A Different Browser For The Best Experience.

Once You're Done, Please Refresh The Page.

ICICI vs HDFC – Which Bank Stock Is Best For You?

The Indian banking sector has seen intense competition between the two leading private sector banks – ICICI Bank and HDFC Bank. With strong financials, robust growth, and healthy asset quality, both banks have their own merits and advantages. But, when it comes to picking one as an investment, opinions seem divided among analysts.

In a recent report, InCred Equities pointed out that HDFC Bank has been facing challenges related to slower deposit growth and liquidity coverage ratio of just 110%. On the other hand, ICICI Bank with its strong deposit franchise will need to match any deposit rate hikes by HDFC to protect its market share. HDFC Bank scores higher in terms of superior access to high-yielding retail and SME loans due to its widespread branch network and growing rural presence.

On the margins front, both banks are neck-to-neck. But HDFC Bank is expected to see higher operating use benefits as its mortgage portfolio expands. Assuming similar asset quality, HDFC Bank is better positioned to deliver a loan growth of 26.1% CAGR over FY23-26 versus 15.9% for ICICI Bank. So, HDFC Bank has an border in terms of growth and profitability based on its reach and operating benefit.

But some analysts beg to differ. As per Nuvama, ICICI Bank has posted the most balanced and diversified growth in the past two years. It expects ICICI Bank’s loan growth at 23-25% in FY25 to be higher than HDFC Bank’s 18-20% growth. The key triggers for ICICI Bank are its strong balance sheet, higher than expected NIMs and adequate liquidity. With constraints in deposit growth and ICICI Bank delivering stellar earnings growth with no quarterly blips, it remains the lowest risk bet on the Indian macro story. The 10% valuation premium for ICICI Bank over HDFC Bank is justified as per Nuvama.

Elara Securities also favors ICICI Bank over its rival. Despite sectoral challenges, ICICI Bank can maintain earnings stability due to its diversified loan book. With the ongoing merger-related uncertainty for HDFC Bank, ICICI Bank provides a clean play on best-in-class return on assets. Its return on risk-weighted assets has improved significantly and is now better than that of HDFC Bank. So ICICI Bank deserves to trade at a premium valuation given its high-quality and granular earnings profile.

Looking at the analyst consensus, ICICI Bank remains the preferred top pick in the banking space. The average 12-month target price for ICICI Bank stands at Rs 1210, implying an upside of 16% from current levels. HDFC Bank’s average target price of Rs 1966 points to a 35% upside. Clearly, the market is baking in higher growth and profitability for HDFC Bank.

But ICICI Bank’s consistent show on asset quality and earnings makes it a safer bet in the near term. Investors need to assess their risk appetite and investment horizon while choosing between the two banking majors. ICICI Bank appeals more to the conservative investor while HDFC Bank suits those with a higher tolerance for risk and volatility. Despite the divergent views on ICICI and HDFC Bank, both remain solid picks for the long term, given their strong competitive positioning.

Leave a Reply

Your email address will not be published. Required fields are marked *