HDFC Bank vs Icicibank Q2 FY25

HDFC Bank reported Q2 FY25 PAT of INR 16,800 crore, up 5.3% YoY (adjusted ~17% excluding bond gains and tax adjustments). Net interest margin remained stable at 3.46%. The bank is accelerating its loan-to-deposit ratio normalization, targeting high-80s within 2-3 years, with FY25 credit growth below system, FY26 at system, and FY27 above system. Deposit growth was healthy at ~13% YoY, with retail branches contributing 84%. Asset quality remained stable with GNPA at 1.4% and gross slippages at 1.2%. Management emphasized calibrated growth in unsecured loans and a cautious stance on wholesale lending due to tight spreads. Key risk: potential margin pressure from elevated liquidity and LCR buildup amid regulatory uncertainty.

Guidance read

Credit growth glide path: FY25 below system, FY26 at system, FY27 above system: Management outlined a three-year plan to normalize the loan-to-deposit ratio, with credit growth slower than system in FY25, matching system in FY26, and exceeding system in FY27. Target LDR of high-80s within 2-3 years: The bank aims to reduce its loan-to-deposit ratio from current ~110% to the high-80s over the next 2-3 years, faster than previously guided 4-5 years. NIM to remain in 3.45%-3.5% range in near term: Management expects net interest margins to stay within the current tight range, with potential improvement once LCR normalizes and regulatory clarity emerges.

Risk read

Key risks include Regulatory uncertainty on LCR and AIF provisions — Draft RBI circulars on LCR and AIF provisioning could impact liquidity requirements and capital adequacy; final guidelines are awaited.; Margin pressure from elevated liquidity buildup — Higher LCR (128%) and excess liquidity may depress near-term margins, though management views this as temporary.; Credit risk in unsecured and priority sector loans — Analysts raised concerns about potential asset quality deterioration in unsecured and priority sector lending; management downplayed risks citing calibrated growth.; Sticky deposit rates and competitive pressure — Deposit rates remain elevated due to credit growth outpacing deposit growth, pressuring margins; management noted limited pricing power in wholesale lending..

Promise ledger

Of 2 tracked promises, management 0 met, 0 close, 2 missed.

ICICI Bank reported a strong Q2 FY25 with PAT growing 14.5% YoY to INR 117.46 billion, driven by healthy loan growth and controlled operating expenses. Core operating profit rose 12.1% YoY to INR 160.43 billion. Domestic loan growth was 15.7% YoY, with retail loans up 14.2% and business banking surging 13% YoY. Net interest margin (NIM) moderated to 4.27% from 4.36% QoQ due to higher deposit costs and day-count impact, but management expects NIM stability in H2. Asset quality remained robust with net NPA at 0.42% and contingency provisions of INR 131 billion (1% of loans). Credit costs stayed low at ~0.38% of advances. Management guided for stable margins and moderate OpEx growth. Key risk: potential further normalization of credit costs in unsecured retail portfolios.

Guidance read

NIM expected to be broadly stable in H2 FY25: Management expects net interest margin to remain stable in the second half of the fiscal year, with potential improvement when rate cuts begin. Operating expense growth to be around 8-10% in near term: OpEx growth moderated to 6.6% YoY in Q2; H1 growth was ~8.5%, and H2 may be slightly higher due to festive spends, but broadly in that range. Personal loan growth to trend down further: Personal loan growth has slowed from 40% YoY to 17% and is expected to decline further over the next couple of quarters due to tighter underwriting.

Risk read

Key risks include Unsecured retail credit cost normalization — Delinquencies in personal loans and credit cards have risen over the past year; further increase could push overall credit costs above the current 40-50 bps range.; NIM compression from deposit repricing — Cost of deposits rose 4 bps QoQ to 4.88%, and further marginal increases are expected, which could pressure NIM if loan yields do not keep pace.; Competitive intensity in business banking lending — Business banking is a competitive segment with pressure on yields; growth may come at lower margins, though management focuses on overall customer profitability..

Promise ledger

Of 3 tracked promises, management 0 met, 0 close, 3 missed.