HDFC Bank vs Icicibank Q2 FY24

HDFC Bank reported a strong Q2 FY24, its first post-merger with HDFC Ltd. Net profit surged 50% YoY to ₹15,976 crore, driven by robust deposit and loan growth. Deposits grew 5.3% sequentially (₹1.1 lakh crore), with 83% retail, while advances rose 4.9% sequentially (₹1.0 lakh crore). Net interest margin (NIM) was 3.65% on total assets, absorbing ~25 bps drag from excess liquidity and ICRR. Asset quality remained stable with GNPA at 1.34%. Management expressed confidence in sustaining growth and profitability (ROA 1.9-2.1%), with plans to expand construction finance and cross-sell. Key risk: potential normalization of credit costs from current benign levels.

Guidance read

ROA maintained at 1.9%-2.1%: Management reiterated its ability to maintain return on assets in the 1.9%-2.1% range, consistent with historical performance. Construction finance book to grow steadily: The bank plans to grow the construction finance portfolio, which will support top-line and margin recovery. NIM recovery over time via better mix: Margins are expected to improve as the bank substitutes high-cost debt with deposits and shifts loan mix towards retail.

Risk read

Key risks include Credit cost normalization — Current credit costs at 49 bps are below historical mean of ~80-100 bps; reversion could pressure profitability.; Margin compression from excess liquidity — The 25 bps drag from ICRR and debt-funded liquidity may persist longer than expected, delaying NIM recovery.; Non-retail NPA slippage from HDFC Ltd book — Though management downplays risk, the inherited non-retail book has some tail risk of further slippage..

Promise ledger

Of 1 tracked promise, management 0 met, 0 close, 1 missed.

ICICI Bank delivered a strong Q2 FY24 with PAT growing 35.8% YoY to INR 102.61 billion, driven by robust loan growth of 18.3% YoY and stable asset quality. Core operating profit rose 21.7% YoY to INR 143.14 billion, while NIM moderated to 4.53% from 4.78% QoQ due to deposit repricing. Management expects full-year margins similar to FY23. Retail and SME loans grew 21.4% and 29.4% YoY respectively, with unsecured portfolios performing well within risk parameters. The bank added 174 branches in the quarter and continues to invest in technology. Key risk: potential margin compression from continued deposit cost repricing and competitive pricing pressures in loans.

Guidance read

Full-year NIM similar to FY23: Management expects net interest margin for FY24 to be at a similar level as FY23 (4.53%), with some moderation from Q2 levels. Continued branch expansion: The bank added 174 branches in Q2 and 350 in H1, with plans to continue expanding based on micro-market opportunities. Technology investment at ~9% of opex: Technology expenses were about 9.2% of operating expenses in H1, and the bank will continue investing in technology, people, and distribution.

Risk read

Key risks include Margin compression from deposit repricing — NIM declined sequentially due to lagged impact of term deposit rate increases; further moderation expected in coming quarters.; Unsecured loan stress in industry — Analysts raised concerns about rising delinquencies in small-ticket unsecured loans; management downplayed risk for ICICI due to focus on upper segments.; Competitive pressure on loan pricing — Management acknowledged intense competition across mortgages, personal loans, and corporate lending, which could pressure yields.; Regulatory penalty on cross-selling — RBI imposed a fine for non-compliance related to cross-selling of non-financial products in 2020-21; corrective actions taken..

Promise ledger

Of 1 tracked promise, management 0 met, 0 close, 1 missed.