ICICI Bank has outpaced HDFC Bank on nearly every count in the last three months

India’s second largest private bank by market capitalisation just saw its quarterly net profit jump three and a half times compared to a year earlier, thanks to the halving of provision for bad loans and a sharp spike in retail loans, driven by its recent thrust to ramp up its sales via digital platforms.

The growth may look sweeter to ICICI Bank’s investors when compared to its bigger rival HDFC Bank.

These are the key financial highlights from ICICI Bank’s earnings:

Growth	ICICI Bank	HDFC Bank
Net interest income	+16.9%	+12.6%
Loan growth	13.7%	14%
Provision for bad loans	-51.7%	+24%
Pre-provision profit	+22.1%	+19%
Retail loan growth	+19.9%	+6.7%
Net interest margin*	+0.17%	Unchanged
Profit after tax	+260.5%	+26%
Gross NPA	+57 basis points	+41 basis points

The highlighted ones are the metrics where HDFC Bank has performed better than ICICI Bank. The change in net interest margin and gross NPA is compared to the preceding three months while all other data is compared to the performance a year earlier.

International broking firm CLSA, which increased its target price on the stock ₹825 (nearly 45% higher than Friday’s closing price), called it the ‘new growth leader’ in the banking space. The optimism around ICICI Bank was visible in its share price in the run up to the earnings day.

ICICI Bank has been the best performing stock among the top 5 banks in the last three months

Bank	Share price change
ICICI Bank	+6.7%
Axis Bank	+4.17%
HDFC Bank	-2.04%
IndusInd Bank	-4.85%
Kotak Mahindra Bank	-5.13%

What’s driving the growth for ICICI Bank

Individual borrowers are the bank’s biggest customers, making up for two thirds of the loan book. And this segment, with a growth of over 19%, saw the highest spike in six quarters. The last time HDFC Bank saw a 19% growth in retail loans was two years ago. “Bank’s initiatives on (the) digital front and aggressive pricing (particularly in mortgages) has led to higher market share capture by the bank in retail segments,” the CLSA report said.

On the other hand, HDFC Bank’s struggles with its online banking has been a recurrent theme. Hardware challenges have caused repeated app outages and moving to cloud could take 12-18 months, according to analysts at Nirmal Bang, another Mumbai-based broking firm.

For the first time in seven quarters, ICICI Bank’s lending to Indian corporates has grown in double digits, exactly 10% in Jan-March 2021. The management said, in a statement to exchanges that the growth came from loans made to government-owned companies and “well-rated” corporates.

The fastest growing segment, even though it’s the smallest, has been the loans given to small medium businesses (SME). With 32.5% growth, nearly one in every ten rupees lent in the last three months went to SMEs.


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