Can HDFC Bank get its mojo back; or will ICICI Bank gallop ahead?
For the first time in almost two decades, investors are not only wondering about whether HDFC Bank is really India’s best private lender, but also whether ICICI Bank has not dislodged this incumbent.
| Key Metrics | HDFC Bank | ICICI Bank |
| Market Cap (₹ Cr) | 11,26,427 | 10,19,688 |
| Stock P/E (x) | 14.3 | 18.2 |
| ROCE (%) | 7.02 | 7.18 |
| ROE (%) | 13.6 | 15.9 |
| ROA (%) | 1.69 | 2.07 |
| Dividend Yield (%) | 1.78 | 0.84 |
India’s biggest private bank is grappling with lower profitability, lower margins and the integration of a financial giant two years after it merged with HDFC Ltd. ICICI Bank, on the other hand, has maintained steady growth, further establishing its status as one of the most efficiently-run banks in the country.
The competition between HDFC Bank and ICICI Bank has turned into a lot more than just a comparison of the quarterly earnings. It now becomes a battle between two different strategies of building long-term value to the shareholders. The scale that HDFC Bank has achieved as a result of its historic merger is being tested to the core on sustainable growth despite front. ICICI Bank, on the contrary, has managed to come back strong with careful execution, sound risk management and operational efficiencies and has turned the tides from stressed assets to one of the best in the industry.
As the Indian economy grows, the demand for credit will also grow and technology will play a pivotal role augmented by Artificial Intelligence (AI) and deeper process automation in the financial services industry. The bigger question is now gaining prominence: Will the future be for the banks that have the largest balance sheet or for the banks that execute again and again with a higher degree of precision?
A Decade of change that shaped the rivalry.
Ten years ago, everyone would have thought such a discussion was superfluous.
By about 2015, HDFC Bank was well-positioned as a leader in the private banking sector in India. It always claimed industry best profitability, one of the lowest stressed asset ratios and conservative lending practices and good governance and disciplined execution. This consistency paid off in the valuation of shares, and HDFC was the yardstick for the value of all other private banks.
Ten years ago, the situation of ICICI Bank was similar to that of HDFC Bank today. As India’s infrastructure and industrial activity slowed down, the bank was facing a problem with increasing the volume of corporate bad loans. The impact of governance issues, declining asset quality and investor confidence was significant in its performance. ICICI Bank was seen as a challenger drying up its credibility, whereas their lead was steadily being increased by HDFC Bank.
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