Synopsis: A leading global brokerage has picked a clear favourite between India’s two biggest private lenders after comparing their June quarter numbers, and the gap seems to be widening rather than narrowing.
The rivalry between the country’s largest private banks has been closely watched for years, but the latest quarterly numbers suggest the contest is becoming less even. A recent brokerage note digs into loan growth, deposits, margins and profitability to explain why one lender is now pulling ahead on almost every count.
Loan Growth: ICICI Widens The Gap
Bernstein said ICICI Bank posted loan growth of around 20% year-on-year in the June quarter, well ahead of HDFC Bank’s 15%. What stood out was that ICICI’s growth wasn’t coming from just one segment. Business banking kept up its momentum, corporate lending picked up pace, and non-mortgage retail loans, an area that had dragged on growth through most of FY26, showed signs of recovery.
HDFC Bank did improve from 12% growth in the previous quarter to 15%, but Bernstein pointed out that this still trails overall system credit growth. The drag continues to come from retail lending, with both mortgages and non-mortgage retail loans growing slowly even as business banking and corporate credit held up well.
Deposits: An Advantage That’s Narrowing
HDFC Bank has long been seen as the stronger player when it comes to deposits, but Bernstein believes this edge has shrunk. While HDFC showed better period-end deposit growth, ICICI came out ahead when deposits were measured on an average balance basis, a method Bernstein considers a more reliable gauge of how a bank’s deposit franchise is actually performing.
ICICI’s average deposits grew 14%, compared with 13% for HDFC, and it also led in average CASA (current account and savings account, essentially low-cost deposits) growth and average term deposit growth. Bernstein noted that HDFC’s stronger headline number was partly driven by a jump in wholesale deposits, which helped ICICI hold a better liquidity position.
Margins And Profitability Tell A Similar Story
On margins, HDFC Bank’s net interest margin, or NIM (the difference between what a bank earns on loans and pays on deposits), fell 12 basis points sequentially, even though the bank cut borrowings during the quarter. ICICI, on the other hand, saw a slight improvement in its NIM. Bernstein said the real issue for HDFC isn’t funding costs anymore, it’s the yields it earns on loans, which have fallen faster than at ICICI since the RBI began cutting rates.
This operating strength is showing up in profitability too. ICICI extended its lead in earnings per share, return on assets, return on equity and return on risk-weighted assets. Bernstein highlighted that the gap in core income between the two banks has widened to around 140 basis points, the largest difference seen in several quarters, helped by stronger fee income growth at ICICI.
Interestingly, the two banks are also spending differently. HDFC kept costs tight with operating expenses up just 4% year-on-year, while ICICI’s expenses rose 10%, largely due to faster branch expansion. Bernstein sees this as a deliberate move by ICICI to close the distribution gap rather than a concern. Asset quality remained steady at both lenders, so it isn’t a major differentiator right now.
Bernstein’s Stance
Bernstein has maintained an “Outperform” rating on both ICICI Bank and HDFC Bank. It has a target price of Rs 1,800 on ICICI Bank, implying an upside of around 25%, and a target price of Rs 1,150 on HDFC Bank, implying an upside of 41%.
The brokerage made only small changes to its HDFC Bank estimates after the June quarter, revising FY27 earnings estimates by about 2% while leaving its valuation assumptions unchanged. Overall, Bernstein sees easing competition and better industry conditions working in ICICI’s favour, keeping it as the preferred pick between the two after the recent dip in its valuation.
Conclusion
Taken together, Bernstein’s numbers paint a picture of two banks moving in different directions despite operating in the same industry upswing. ICICI Bank is growing faster, holding a stronger margin position, and converting that into better profitability, while HDFC Bank continues working through legacy pressures on retail lending and loan yields. With asset quality steady at both lenders, execution rather than balance sheet strength now appears to be the real dividing line between India’s two largest private banks.
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
