For long-term investors, two names stand tall in India’s private banking sector – HDFC Bank and ICICI Bank. Both these banking giants have built a stalwart position in the financial market with sound financial products and services catering to millions of customers. Investors are often faced with the decision to invest in any of these two banks for the long term as it has a significant market position and strong growth potential. In this blog, we’d extensively compare HDFC Bank and ICICI Bank by studying all the potentials such as strengths, financial performance, stock trends, and expert insights to aid you in your choice.
Stock Performance and Trends: HDFC Bank vs ICICI Bank
While both HDFC Bank and ICICI Bank have long-term track records of strong returns, the stock performance of each has presented different trends in recent months.
1. ICICI Bank: The Recent Winner
ICICI Bank has topped HDFC Bank in terms of stock price performance in 2024. According to the latest available statistics, ICICI Bank has shot up by over 33% in YTD terms, outclassing HDFC Bank, with the latter having gained around 9% in the period. The Nifty Bank index, which is the benchmark indicator for the banking sector, registered a growth of about 10% in the period.
ICICI has given positive returns in 11 out of 12 months in 2024, indicating growth consistency. HDFC Bank has given positive returns in 9 out of 12 months during the same period. ICICI Bank touched an all-time high of ₹1,361.35 in September 2024, but retreated a bit, trading around ₹1,328.95, which is still 37% higher than its 52-week low of ₹970.05 recorded in January 2024.
On the other hand, HDFC Bank has been robust but slower in its momentum as compared to ICICI. It hit an all-time high of ₹1,880 in September 2024 and currently is at ₹1,858.95, about 1% shy of its all-time high. Over the last year, HDFC Bank returned 4%, falling short of ICICI Bank and went up by 31% in its stock price.
2. Performance over three years: ICICI Bank outperformed HDFC Bank
Looking at the long-term perspective (over the last three years), ICICI Bank has had better returns, more than 76%, as compared to HDFC Bank, which has had an increase of 23% in the same period. The difference shows that ICICI Bank has had a very strong growth trajectory in recent years, especially considering it is still recovering from the past and building up its market position.
Q2FY25 Earnings: A Detailed Breakdown
Assessing the financial strengths of both banks and their performance in Q2FY25 would give better insights regarding their respective market positioning and growth prospects.
1. HDFC Bank’s Earnings: Steady Growth Amidst Mergers
HDFC Bank had reported a 5.3% YoY growth in standalone net profit at ₹16,821 crore for Q2FY25, against ₹15,976 crore for the same period last year. The bank’s Net Interest Income (NII) increased by 10% YoY to ₹30,110 crore, from ₹27,390 crore in Q2FY24. HDFC Bank’s Net Interest Margin (NIM) was at 3.46%, slightly lower than 3.47% in Q1FY25.
One of the key highlights for HDFC Bank is its merger with Housing Development Finance Corporation (HDFC), finalized in July 2023. This merger is expected to streamline operations, improve efficiency, and strengthen HDFC Bank’s position in the market.
2. ICICI Bank’s Earnings: Robust Performance and Strong Non-Interest Income Growth
ICICI Bank reported a 14.5% YoY growth in net profit for Q2FY25, totalling ₹11,746 crores, driven primarily by non-interest income, fee income, and treasury gains. The bank’s NII grew by 9.5% YoY, reaching ₹20,048 crore. Despite this strong performance, the Net Interest Margin (NIM) declined slightly to 4.27%, down from 4.53% in Q2FY24, reflecting some challenges in maintaining high margins.
Diversified income streams through wealth management and treasury operations also support strong growth in ICICI Bank. Its balance sheet has improved greatly with a growing loan book and good cost management.
Which Bank Would You Invest in for the Long Term?
For investors looking for long-term growth, both HDFC Bank and ICICI Bank offer compelling investment opportunities, albeit with slightly different strengths and market outlooks. Let’s look at expert opinions on both banks:
HDFC Bank: A Long-Term Favorite
Shrikant Chouhan, Head of Equity Research at Kotak Securities, recommends HDFC Bank for long-term investments. According to Chouhan, four key factors make HDFC Bank an attractive pick:
a) Good Liquidity Scenario:
HDFC Bank is well placed to enhance operations smoothly given the favourable liquidity scenario.
b) Pro-active C-D Ratio Management:
The HDFC strategy of balancing out its Credit-Deposit (C-D) ratio would further its balance sheet and investor confidence.
c) Clear Credit Growth Roadmap:
HDFC’s well-set credit growth plan ensures steady progress long term, even as the marketplace sees plenty of fluctuations.
d) Attractive Valuations:
HDFC Bank has an attractive valuation as analysts, hence making it a low-risk investment with a lot of upside potential.
Dnyanada Vaidya, Research Analyst, Axis Securities also likes HDFC Bank because it focuses on its LDR, which helps to strengthen the financials of the bank. He has underlined that HDFC Bank has pristine asset quality and has very good underwriting practices that will enable it to do well in a difficult market.
Narendra Solanki, Head of Fundamental Research at Anand Rathi Shares, is also constructive on HDFC Bank, with strong margins, improving asset quality and attractive valuations. However, Solanki also feels that one should not give up on ICICI Bank as the credit metrics are improving and it may be a good short to medium-term play.
ICICI Bank: Strong Medium-Term Play
While HDFC Bank is the preferred choice for long-term investors, ICICI Bank has its merits for those looking for short- to medium-term gains. ICICI Bank’s impressive return on equity (RoE), improving credit quality, and strong non-interest income make it a strong contender. Experts note that ICICI Bank has a superior C-D ratio, improving credit costs, and a solid financial performance that supports its short-term growth.
Other future growth drivers for ICICI Bank include digital banking, financial inclusion, and diversified income streams such as wealth management, insurance, and mutual funds. This makes ICICI Bank a good bet for medium-term capital appreciation.
Technical Analysis: Strong Momentum for Both Banks
Mandar Bhojane, an Equity Research Analyst at Choice Equity Broking, also speaks of HDFC Bank’s strong bullish momentum. The stock has seen a breakout from a long consolidation range and continues to move north, supported by increasing volumes. Bhojane sees an upside potential with targets in the short term at ₹2,200 to ₹2,400, supported by an RSI of 68.34.
It’s also almost breaking out from higher highs and volumes, though with an RSI of 64.44. It looks promising on an upward move.
The setup looks technically pretty promising for the technical run, ICICI Bank would touch ₹1,450 and then ₹1,550 levels; support can be given around ₹1,280; stop loss below at ₹1,230.
Conclusion: HDFC Bank vs ICICI Bank for Long-Term Investment
Both the Banks are thus very attractive investment opportunities, though growth patterns and market positions differ slightly.
HDFC Bank is a standout for long-term investors with market leadership, strong asset quality, and a conservative yet effective growth strategy. Therefore, it is a safe bet for stability, consistent performance, and watchfulness over profit margins. The strategic move that the bank has undertaken to reduce the Credit-Deposit ratio, along with its improving liquidity and robust fundamentals, is the main reason why one favours long-term capital appreciation.
On the other hand, ICICI Bank has shown good medium-term growth prospects with improving credit quality, diversified income sources, and strong performance in digital banking. Though it may face challenges in sustaining high NIMs, overall market positioning and growth strategies make ICICI Bank a strong contender in private banking.
HDFC Bank remains an investor’s favourite in the long term, considering a consistent track record with sound fundamentals and a well-structured growth plan. But for medium-term opportunities, ICICI Bank still holds out an attractive investment proposition.
Investors should take into account personal financial goals, risk tolerance, and investment horizon before making this choice between these two banking giants. Both banks are well-equipped to take advantage of the surging Indian economy and the expansive nature of the overall banking sector, making them great choices for any diversified portfolio.
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