ICICI Bank v/s HDFC bank

The banking stocks in India were going through a tough time. Fears of stagflation and bad loans of COVID have kept the investors away from Banking stocks, but it seems like the winter for them is over as most analysts are considering adding them to their portfolio because of their low valuations.

Due to that, Bank Nifty has risen by 7% in the last one month beating Nifty 50 the benchmark index, which rose only by 4%.

Most banks came up with their quarterly results, which were surprisingly good. The post covid recovery in the market has aided the advanced growth of these banks.

The banks that would benefit largely from this growth are Kotak, ICICI, and HDFC. 

So we decided why not compare the behemoths in the industry and see which one is a better investment option.

ICICI Bank v/s HDFC bank

ICICI bank

ICICI Bank Ltd. is one of the largest private Indian multinational bank and financial services companies founded in 1955.

It provides a wide range of products and services to corporate and retail customers in the areas of investment banking, life and non-life insurance, venture capital, and asset management.

It has a presence in 17 countries and a network of 5,275 branches and 15,589 ATMs across India.

In most cases, when there is a problem in the financial industry, there is a common name! Whether it was the 2008 financial crisis, the 2012 corporate debt debacle, or the 2018-19 IL&FS crisis, ICICI Bank was always in a tight spot due to its rigid management style, governance concerns, and aggressive mindset.

That could be why, until recently, the bank was unable to obtain premium valuations like its peers HDFC and Kotak.

What has changed? The management!

After Sandeep Bakhshi took over the bank as CEO things changed drastically. 

The Chanda Kocchar fiasco had left the bank bleeding, so they had call in someone who could change the fate of the bank. Bakhshi was the obvious choice because he was known for his crisis handling abilities.

For ex. When ICICI Lombard faced rising delinquencies in 2008, he was called in to fix the crisis. He proved his mettle their and due to that nn 2010, he was appointed CEO of ICICI Prudential Life.Under his reign, ICICI Prudential's Assets under Management (AUM) increased to Rs 1.4 Lakh Cr in 2018 from Rs 57,319 Cr in March 2010.

After he took over the bank, he reorganised the bank's rank and file, chose an open office structure, and encouraged product innovation from bankers on the ground.

The numbers clearly speak for his work. It’s core operating profit grew 22.3% y-o-y to 383.47 bn in FY2022.It’s Net interest income (NII), the income that it earns, which is interest on loans minus interest on deposit, it increased by 21% year-on-year to ` 12,605 crore (US$ 1.7 billion) in Q4-2022 from ` 10,431 crore (US$ 1.4 billion) in Q4-2021.

HDFC Bank

HDFC Bank is India's leading private bank, and it was one of the first to receive Reserve Bank of India (RBI) approval to establish a private sector bank in 1994.

Large and mid-sized businesses, financial institutions, PSUs, MSMEs, farmers, wholesalers, and traders are all served by the bank.

The bank currently has 21,360 Banking Outlets, 16,087 ATMs + cash deposit and withdrawal machines, and 5608 branches.

These were some details about the business of these banks, let’s dive in to the financials to compare

Advances: In simple words, a bank’s business is accepting deposits offering low interest and lending money of those deposits to people who need it. The difference between the interest given to depositors and that received from the borrowers is the bank’s income. So one way to determine if a bank if growing is to check the growth in its Advances and loans.

If we look at the loan book of HDFC bank, it stood at around Rs. 13 trillion by FY22, ICICI banks loan book stood behind it t INR9 trillion, which grew 21.3% YoY, faster than HDFCs.

Deposits : The deposits with ICICI bank grew 13.4% YoY, but fell 1.3% QoQ to INR10.5 trillion, within which CASA/term deposits grew ~16%/~11% YoY. 

While HDFCs deposits for the quarter were up 16.8 per cent YoY at Rs 15 trillion. 

Asset Quality: 

ICICI bank has worked tremendously on improving its asset quality. It’s GNPA declined from 4.96 in FY21 to 3.60% in FY22, while its NNPA has declined from 1.14% to 0.76%

Meanwhile, HDFC bank’s GNPA declined from 1.32% in FY21 to 1.17% in FY22, while its NNPA reduced from 0.4% in FY21 to 0.32% in FY22.

Conclusion

Both these banks are so large that they are know DSIB, Domestic Systemically Important Banks (D-SIBs), which means they are quite important for our economy. 

While HDFC bank is still the behemoth and has managed to keep its financials healthy, ICICI bank is growing fastest in the banking sector. Both of these banks have their own advantages and drawbacks, like HDFC is undergoing major changes because of its merger, ICICI is witnessing a change in its strategy with its focus now on retail.