ICICI Bank vs HDFC Bank: Which of the two is a 'must-own' stock? Here're share price targets

Analysts tracking ICICI Bank and HDFC Bank largely have positive views on the two private lenders, but ICICI Bank remains the preferred pick between the two for a couple of brokerages. While HDFC Bank's valuations look reasonable, a few analysts cited the merger-related uncertainty for HDFC Bank and felt ICICI Bank is the lowest-risk play on the domestic macros.

Case in favour of HDFC Bank

InCred Equities said while HDFC Bank has been struggling over deposit growth and weak LCR (110 per cent), any probable deposit rate hike adopted by HDFC Bank needs to be followed by ICICI Bank to manage its market share. Also, on the yield front, HDFC Bank has superior access against ICICI Bank on unsecured retail & SME/MSME loans front amid a wider branch network and improved rural/semi-urban reach, it said.

Both the banks are similarly placed on the margins front and InCred Equities expects an improving operating leverage to play a key trigger for HDFC Bank with the rise in the size of large-ticket mortgage loans, which leads to lower operating expenses.

"Thus, assuming a similar asset quality profile, HDFC Bank is better placed than ICICI Bank on the growth (due to improved reach) and profitability) improved operating leverage) fronts. We expect HDFC Bank to post 26.1 per cent PAT CAGR over FY23F-26F against ICICI Bank’s 15.9 per cent," it said.

Cases in favour of ICICI Bank

Nuvama said ICICI Bank has consistently delivered the most balanced and granular growth over the last two years. With a strong balance sheet, better-than-expected ne interest margin (NIM) and comfortable liquidity, it expects its loan growth in FY25 to be higher than HDFC Bank’s and its RoA to remain higher than other large banks.

In a sector constrained on deposits, it believes ICICI Bank becomes a "must-own stock" and is the lowest risk play on the Indian macro without any quarterly aberrations that are reported by the other large banks. "The stock currently trades at a 10 per cent premium to HDFC Bank, which we believe is justified given the relative earnings performance of the two banks," it said.

Elara Securities said while the banking sector may be facing strain, ICICI Bank could hold against the tide with steady earnings . "With merger-related uncertainties for HDFC Bank , ICICI Bank is a clean play on best-in class RoA. ICICI Bank’s return on risk-weighted assets has drastically improved and is now better than HDFC Bank's. ICICI Bank should trade at a premium on high-quality granular earnings. Maintain BUY with revised target of Rs 1,214 (from Rs 1,192) as we roll to September 2025E – ICICI Bank is our top sectoral pick,' it said.

Nomura India and Motilal Oswal Securities called ICICI Bank their preferred banking pick.

"The price performance has been a bit disappointing for ICICI Bank despite the bank delivering strong earnings performance. The challenge is relative in nature. ICICI Bank is trading at peak valuation in our coverage universe (not as compared to its history) among large banks. ICICI Bank would have to deliver superior returns that is sustainable in nature in the medium term to command a higher premium," Kotak said as ICICI Bank remains "one of our top picks."

Target prices

An average target price of Rs 1,210 on ICICI Bank, as suggested by Trendlyne, suggests a 16 per cent potential upside. HDFC Bank's average target price of Rs 1,966 suggests a 35 per cent upside.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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