The two banking giants, ICICI Bank and HDFC Bank, released their Q1 FY26 earnings yesterday. While both reported solid numbers, a closer analysis reveals that ICICI Bank may have edged ahead in performance this quarter. Here's a detailed comparison between the two, covering growth, margins, asset quality, and valuations.

Loan and Deposit Growth

ICICI Bank's performance was steady, with total deposits growing by 12% and loans expanding at the same rate of 12%. HDFC Bank, on the other hand, posted a stronger deposit growth of 16.2% but reported a modest 6% growth in its loan book.

Both banks continue to gain market share in both loan and deposit portfolios. However, ICICI Bank seems to be marching ahead, while HDFC Bank appears to be slowing down loan growth as it adjusts its loan-to-deposit ratio (LDR) and deals with internal restructuring following the merger.

Loan Portfolio Composition

Breaking down the loan portfolio further:

ICICI Bank’s retail loan segment showed a 6.9% growth, while corporate loan growth slipped to just 7.5%.

HDFC Bank reported a slightly better retail loan growth at 8%, but its corporate loan portfolio saw a disappointing growth of only 1.7%.

Retail vs Wholesale Loan Mix

• HDFC Bank currently has a wholesale to retail loan mix of 49:51, whereas ICICI Bank stands at 47:53. Both banks are increasingly focusing on retail loans to drive growth and margin expansion.
• HDFC Bank in particular needs to work on recovering its margins, which took a hit this quarter.
• Non-Performing Assets (NPAs) and Asset Quality

ICICI Bank showed strong asset quality improvement:

• Gross NPAs declined by 14%
• Gross slippages stood at ₹60 billion
• Provision Coverage Ratio (PCR) at 75.3%
• Net NPAs declined to just 0.41%

HDFC Bank, while still stable overall, faced minor challenges:

• Credit cost came in slightly elevated at 41 basis points
• The bank made a substantial floating provision of ₹10,000 crore
• Asset quality saw minor deterioration, even excluding the agri loan segment

Overall, ICICI Bank’s asset quality remains one of its strongest points this quarter. The ₹10,000 crore provision by HDFC Bank was a proactive move, indicating prudence, even if it impacted reported profitability.

Net Interest Margins (NIMs) and Cost of Funds

HDFC Bank's NIM fell to 3.4%, which is a concern for analysts and investors. Recovery to 4% will be key to restoring sentiment. ICICI Bank, meanwhile, maintained better margin performance.

On the cost of funds:

ICICI Bank pays around 4.48% on incremental deposits

HDFC Bank pays around 4.8%

This suggests favorable conditions for both banks, with competitive deposit costs supporting profitability.

Capital Adequacy

Both banks are well-capitalized, positioning them to take full advantage of the upcoming credit growth cycle:

ICICI Bank Tier-1 Capital Adequacy: 16.97%

HDFC Bank Tier-1 Capital Adequacy: 17.4%

Valuation Metrics

From a valuation standpoint:

ICICI Bank is trading at 3.34 times price-to-book (P/B)

HDFC Bank is trading at 2.49 times P/B

While neither stock is particularly cheap, HDFC Bank’s lower P/B could reflect some of the recent challenges it's facing, particularly around its NIM erosion and merger-related adjustments.

Conclusion: Who Stands Taller This Quarter?

While both ICICI Bank and HDFC Bank maintain strong fundamentals — including robust capital positions, wide physical and digital networks, and capable management — ICICI Bank has clearly outperformed HDFC Bank this quarter.

ICICI Bank delivered steady growth, improved asset quality, and maintained healthy margins. HDFC Bank, although still solid, showed signs of pressure due to merger adjustments, slowing loan growth, and narrowing NIMs. Its large floating provision does reflect conservative management, but investor focus will remain on its ability to recover margins and resume loan book acceleration.

Key Takeaways

• ICICI Bank has gained an edge in loan growth and asset quality
• HDFC Bank’s slower loan growth and NIM compression are concerns
• Both banks remain fundamentally strong and are well-placed for future growth
• Valuations suggest ICICI Bank is priced higher, possibly reflecting its better execution this quarter
• The coming quarters will be crucial in determining if HDFC Bank can bounce back and close the performance gap.

Disclaimer:This article is purely informational and not investment advice. Please consult a financial advisor before making investment decisions. The data is sourced from public financial disclosures and analyst commentary