ICICI Bank vs HDFC Bank: Who’s racing ahead in FY25?

A comparison of FY25 results of India’s two largest private sector lenders by total assets shows ICICI Bank continues to maintain its lead over the top player, HDFC Bank, in some key parameters. Both declared results on 19 April.

ICICI Bank’s FY25 net interest margin (NIM) stood at 4.3% versus 3.5% of HDFC Bank, which is struggling to regain its mojo to reach the 4.1% NIM achieved in FY23 just before its merger with HDFC. Even when it comes to return on average assets (RoAA), ICICI Bank is ahead at 2.4% for FY25 versus 1.9% RoAA of HDFC Bank. In terms of balance sheet size, ICICI Bank’s total assets rose 13% in FY25 vis-à-vis the single-digit growth of 8% for HDFC Bank.

HDFC Bank grew its advances (including securitized loans) at just about half the rate of growth in deposits, while ICICI Bank showed an almost equal growth in both advances and deposits at 14% for FY25.

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ICICI Bank has taken a higher risk compared to HDFC Bank, evident from the risk-weighted assets to total assets ratio. Simply put, if both banks have lent the same amount and one has lent more in the mortgage category, then the one with higher mortgage loans will have lower risk-weighted loans. The former had the ratio at 76% as of March 2025, whereas it was 68% for the latter. However, ICICI Bank has managed the higher risk well, given that its credit cost (cost of bad debt) stood at 35 basis points, very close to that of HDFC Bank. One basis point is one-hundredth of a percentage point.

ICICI has the lead

To be sure, ICICI Bank’s March quarter (Q4FY25) performance is impressive even in isolation without a comparison with peers.

Core pre-provisioning operating profit (PPoP), without considering dividend income from subsidiaries and treasury income, rose 12.7% year-on-year to ₹16,710 crore. Net interest income (NII), including a small component of interest on income tax refund of ₹114 crore, increased by 11% to ₹21,193 crore. Fee income was up 16% to ₹6,306 crore. While lending-linked fees seem to be doing well, the bank is also focused on generating transactional fee revenue from payments and cards. The cost-income ratio improved 130bps to 37.9% as income increased at a faster pace than operating expenses.

Gross slippage or addition to gross non-performing assets (NPA) was lower at 1.6% for Q4FY25—an improvement of 20bps on-year. Though a quarter-on-quarter comparison generally reveals a better picture of incremental NPA, it gets distorted as agricultural loans, including Kisan credit cards, show higher slippages in the first and third quarters of a fiscal year. The bank’s management does not foresee any significant stress in asset quality as of now.

Also Read: HDFC Bank is bracing for the margin impact of repo rate-cutting cycle

Meanwhile, akin to peers, a lower interest rate cycle is likely to hit ICICI Bank as well. Thus, Kotak Institutional Equities has reduced the bank’s earnings estimates marginally. The analysts note that the share of repo-linked loans in total loans has steadily increased over the last three years to FY25 from 41% to 53%. These loans are vulnerable to any reduction in the repo rate.

The brokerage values the bank at 2.7x of adjusted book value or 19x earnings per share estimates based on March 2027. After factoring in the value of subsidiaries at ₹230 per share, their target price for the stock is ₹1,600.

ICICI Bank’s shares hit a new 52-week high of ₹1,436 apiece on Monday, though they closed flat. The stock had jumped 4% in the previous trading session before the results.

Also Read: ICICI Bank sees RBI repo rate cuts impacting margins