ICICI Bank vs HDFC Bank: Which of the two is a must-have stock?

ICICI Bank vs HDFC Bank: Which of the two is a must-have stock?: Incred Equities said with HDFC Bank struggling with deposit growth and weak LCR (110%), ICICI Bank needs to weather any potential deposit rate hike to manage its market share.

Analysts tracking ICICI Bank and HDFC Bank have a largely positive view of the two private lenders, but for some brokerage firms, ICICI Bank remains the preferred choice between the two. While HDFC Bank's valuations look reasonable, some analysts cited merger-related uncertainty for HDFC Bank and felt that ICICI Bank is the least risky play on domestic macros.

Case in favor of HDFC Bank

InCred Equities said that while HDFC Bank is struggling with deposit growth and weak LCR (110 percent), any potential deposit rate hike adopted by HDFC Bank will need to be followed by ICICI Bank to manage its market share. Is. Additionally, on the yield front, HDFC Bank has a better reach than ICICI Bank on the unsecured retail and SME/MSME loan front amid a wider branch network and better rural/semi-urban reach.

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Both the banks are evenly placed on the margin front and Incred Equities expects an improvement in operating leverage to play a key trigger role for HDFC Bank with the increase in the size of big-ticket mortgage loans, leading to operational gains. Expenses will be less.

Thus, assuming a similar asset quality profile, HDFC Bank is better positioned than ICICI Bank on the fronts of growth (due to better penetration) and profitability due to operating leverage). Will post 26.1 percent PAT CAGR FY-26F against ICICI Bank’s 15.9 percent, it said.

Cases in favor of ICICI Bank

Nuwama said that ICICI Bank has consistently achieved the most balanced and comprehensive growth in the last two years. With a strong balance sheet, better-than-expected interest margins (NIM), and comfortable liquidity, its loan growth is expected to exceed HDFC Bank in FY2025 and its ROA will remain higher than other large banks.

In a limited area of deposits, it believes ICICI Bank has become an essential stock and is the least risky bank on the Indian macro with no quarterly deviations, as reported by other large banks. The stock is currently trading at a 10 percent premium to HDFC Bank, which we believe is appropriate given the relative earnings performance of the two banks, it said.

Elara Securities said while the banking sector may face pressure, ICICI Bank may turn the tide with stagnant earnings. With merger-related uncertainties for HDFC Bank, ICICI Bank is a clean play on best ROA. ICICI Bank's return on risk-weighted assets has improved significantly and is now better than HDFC Bank. Premium to ICICI Bank Should trade on high-quality granular income Maintain buy with a revised target of Rs 1,214 (from Rs 1,192) by September 2025E - ICICI Bank is our top regional pick,' it said.

Nomura India and Motilal Oswal Securities named ICICI Bank as their preferred banking choice.

The value performance for ICICI Bank has been a bit disappointing despite the bank delivering strong earnings performance. The challenge is relative. ICICI Bank is trading at extreme valuations in our coverage universe among the large banks (not compared to its history ). Kotak said ICICI Bank will have to deliver better returns that are sustainable in the medium term to command higher premiums. ICICI Bank remains one of our top picks.

Target prices

As suggested by Trendline, the average target price of Rs 1,210 on ICICI Bank suggests a potential upside of 16 percent. HDFC Bank's average target price of Rs 1,966 suggests an upside of 35 percent.

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