The Indian stock market ended higher on July 21, 2025, with the S&P BSE Sensex gaining 442.6 points (0.54%) to close at 82,200.34 and the NSE Nifty50 rising 122.30 points (0.49%) to reclaim the 25,090.70 mark. The surge was primarily fueled by robust Q1FY26 earnings from banking heavyweights HDFC Bank and ICICI Bank, boosting the Nifty Bank index by 1.19%. ICICI Bank’s shares soared 2.71% after reporting a 15.5% YoY net profit growth to ₹12,768 crore, while HDFC Bank gained 2.25% with a 12.2% YoY profit increase to ₹18,155 crore. Positive investor sentiment, supported by strong loan and deposit growth, overshadowed weaker performances in IT and consumer sectors, driving the market’s upward momentum.
India’s banking sector is a powerhouse, driving economic growth by channeling capital and expanding credit access. The recent Q1FY26 earnings from HDFC Bank and ICICI Bank, two of India’s leading private lenders, have sparked a bullish wave in the market, with both banks posting robust results. Shares of HDFC Bank surged 2.25% to ₹2,001.50, while ICICI Bank climbed 2.71% to ₹1,464.50 on the NSE, reflecting strong investor confidence. But which bank truly outperformed in the June quarter? Let’s dive into the numbers and compare their performance across key metrics like revenue, net profit, advances, and deposits.
Core Business Growth: Advances
Advances, or loans disbursed, are a critical measure of a bank’s growth. ICICI Bank took the lead here, reporting a stellar 12% YoY growth and 1.5% QoQ growth in advances, reaching ₹13,64,157 crore. This was driven by a balanced mix of retail and corporate lending, with retail advances growing 6.9% YoY and corporate advances up 7.5% YoY. Despite a slight sequential dip in corporate lending, ICICI’s double-digit growth signals its aggressive yet prudent lending strategy.
HDFC Bank, while still strong, reported a more modest 8.3% YoY growth and 1.7% QoQ growth in advances, totaling ₹27,42,300 crore. Its retail segment grew by 8.1% YoY, but corporate advances lagged at 1.7% YoY, with a 1.3% QoQ de-growth. The retail-to-corporate ratio for HDFC Bank stood at 57:43, slightly more retail-heavy compared to 56:44 last year. ICICI’s faster loan book expansion gives it an edge in this category.
Deposits: The Fuel for Lending
Deposits are the lifeblood of any bank, funding their lending operations. HDFC Bank outpaced ICICI in deposit growth, with a robust 16.5% YoY increase to ₹26,57,600 crore. However, its CASA (Current Account and Savings Account) ratio, which reflects low-cost deposits, was 34%, indicating a slightly higher reliance on costlier term deposits.
ICICI Bank reported a solid 12.8% YoY growth in deposits, reaching ₹16,08,500 crore. Its CASA ratio was notably higher at 38.7%, up from 38.4% in Q4FY25, showcasing its strength in attracting low-cost deposits. A higher CASA ratio translates to lower funding costs, giving ICICI a competitive advantage in profitability.
Core Income Growth: Net Interest Income (NII)
Net Interest Income (NII), the difference between interest earned from loans and interest paid on deposits, is a key profitability metric. ICICI Bank shone with a 10.6% YoY increase in NII to ₹21,635 crore, supported by stable margins and selective high-yield lending. Its net interest margin (NIM) stood at 4.25%, though slightly down from 4.43% YoY, reflecting resilience despite rising deposit costs.
HDFC Bank’s NII grew by a more modest 5.4% YoY to ₹31,438 crore, but its NIM slipped to 3.35% from 3.46% in the prior quarter, pressured by higher deposit costs. While HDFC’s absolute NII is higher due to its larger balance sheet, ICICI’s faster NII growth highlights its efficiency in managing margins.
Profitability: Net Profit
Profitability is where ICICI Bank truly pulled ahead. It reported a 15.5% YoY increase in standalone net profit to ₹12,768 crore, with consolidated profit rising 15.9% to ₹13,558 crore. This strong performance was driven by robust loan growth, stable asset quality, and controlled provisions.
HDFC Bank posted a 12.2% YoY rise in standalone net profit to ₹18,155 crore, bolstered by solid deposit mobilization and a significant ₹9,128 crore one-off gain from the IPO of its subsidiary, HDB Financial Services. However, its consolidated profit dipped slightly by 1.31% YoY to ₹16,258 crore, reflecting challenges like higher provisions (₹14,441 crore, including ₹9,000 crore floating and ₹1,700 crore contingent provisions). ICICI’s superior profit growth underscores its operational efficiency.
Asset Quality: A Mixed Picture
Asset quality is a crucial indicator of a bank’s financial health. ICICI Bank improved significantly, with its gross non-performing assets (GNPA) dropping to 1.67% from 2.15% YoY, and net non-performing assets (NNPA) slightly better at 0.41% from 0.43%. This reflects ICICI’s disciplined risk management and focus on high-quality lending.
HDFC Bank’s asset quality saw a marginal deterioration, with GNPA at 1.40% and NNPA at 0.47%, slightly up from the previous year. Despite this, HDFC’s historically low NPA ratios and robust provisioning coverage keep it in a strong position. However, ICICI’s sharper improvement in asset quality gives it a slight edge.
Investor Sentiment and Market Reaction
The market’s reaction tells a clear story. ICICI Bank’s shares outperformed, gaining 2.71% compared to HDFC Bank’s 2.25% post-results, reflecting investor preference for ICICI’s stronger earnings. Posts on X echoed this sentiment, with analysts noting ICICI’s “clean beat” and strong CASA growth, while HDFC faced challenges like margin headwinds and a high loan-to-deposit ratio (LDR). One analyst highlighted ICICI’s “pristine asset quality” and “blockbuster results,” positioning it as a market leader.
HDFC Bank, however, wasn’t without its strengths. Its larger balance sheet (₹39,102 billion vs. ICICI’s ₹13,41,766 crore) and deposit base (₹25,280 billion vs. ICICI’s ₹14,86,635 crore) make it a formidable player. Brokerages like Antique Stock Broking maintained a ‘Buy’ rating on HDFC with a target price of ₹2,270, citing its deposit traction and network expansion. ICICI also earned a ‘Buy’ rating with a raised target of ₹1,680, reflecting its growth momentum.
Which Bank Takes the Crown?
ICICI Bank emerges as the stronger performer in Q1FY26, driven by:
Faster loan growth (12% YoY vs. HDFC’s 8.3%)
Higher NII growth (10.6% vs. 5.4%)
Superior profit growth (15.5% vs. 12.2%)
Better asset quality (GNPA at 1.67% vs. 1.40%)
Higher CASA ratio (38.7% vs. 34%)
HDFC Bank, while trailing in growth metrics, remains a giant with its larger deposit base, extensive branch network (9,455 branches vs. ICICI’s 6,983), and a one-off gain boosting its earnings. Its conservative lending approach and robust capital adequacy (CAR at 19.6% vs. ICICI’s 16.55%) make it a stable choice for risk-averse investors.
Why Bulls Are Confident
The positive results from both banks have fueled bullish sentiment in the banking sector. ICICI’s outperformance signals its ability to navigate a challenging environment with rising deposit costs and potential rate cuts, while HDFC’s scale and strategic moves, like the HDB Financial Services IPO, reinforce its long-term potential. The Indian banking sector, projected to grow to $480 billion by 2029, benefits from these titans’ resilience, driving investor optimism.
For investors, ICICI Bank offers higher growth potential and better risk-reward in the short to medium term, as noted by analysts like Anshul Jain from Lakshmishree Investment and Securities. HDFC Bank, however, remains a solid long-term bet for those prioritizing stability and scale. A balanced portfolio might include both, leveraging ICICI’s momentum and HDFC’s reliability.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always consult a financial advisor before making investment decisions.
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