HDFC Bank vs ICICI Bank: Stock price targets, technicals, valuation, financial metrics and more

Shares of country’s top two private sector lenders HDFC Bank Ltd and ICICI Bank Ltd are trading near their 52-week low and 52-week high, respectively. Shares of HDFC Bank, which is India’s largest lender in terms of market capitalisation and assets, are down 16% this year. The weakness in the Sensex heavyweight came even as the lender reported a 34 per cent rise in its standalone net profit to Rs 16,373 crore in Q3 against Rs 12,259 crore in the corresponding quarter of the previous fiscal year.

The stock fell to a 52-week low of Rs 1363.45 on February 14, 2023. In the current session, the HDFC Bank stock was trading at Rs 1,422 mark against the previous close of Rs 1422.25 on BSE.

On the other hand, ICICI Bank shares were trading at Rs 1059.60 in the current session. The large cap stock climbed to a 52-week high of Rs 1,069.75 on February 23, 2024. It has risen 6% in 2024. In Q3, profit jumped 24% to Rs 10,271.54 crore compared with Rs 8,311.85 crore in the same quarter last year.

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VALUATION

HDFC Bank has a price to book ratio of 2.48. It has a PEG ratio of 0.5. A stock having PEG less than 1 is considered undervalued and with PEG ratio above 1 is regarded as an overvalued one.

On the other hand, ICICI Bank’s price to book ratio stood at 3.53. ICICI Bank has a PEG ratio of 0.5.

Here’s a look at key metrics, which reflected the financial health of both lenders as of December 31, 2023.

Return on Assets

Return on assets (RoA) of HDFC Bank at the end of Q3 stood at 0.49. On the other hand, RoA of ICICI Bank came at 2.19 at the end of December 2023 quarter. RoA is the ratio of how profitable a company is compared with its total assets.

CASA Ratio

The CASA ratio of the HDFC Bank stood at 37.7% as of December 31, 2023 lower than the 44% as on December 31, 2022. On the other hand, CASA ratio of ICICI Bank stood at 39.4% as of December 31, 2023 lower than the 44.6% as on December 31, 2022.

Net interest margin

Net interest margins (NIMs) of HDFC Bank slipped to 7.7% in the last quarter against 8.1% in the December 2022 quarter. In case of ICICI Bank, net interest margins (NIMs) fell to 4.4% in the last quarter against 4.65% in the December 2022 quarter.

Yield on assets

HDFC Bank’s yield on assets rose to 8.3% in Q3 against 7.7% in Q3 of the last fiscal. ICICI Bank's yield on assets rose to 8.71% in Q3 against 8.07% in Q3 of the last fiscal.

Capital adequacy ratio

Capital adequacy ratio (CAR) of HDFC Bank stood at 18.4% as on December 31, 2023 against 19.4% on December 31, 2022. ICICI Bank's capital adequacy ratio (CAR) stood at 16.42% as on December 31, 2023.

Net Interest Income

Net Interest Income (NII) of HDFC Bank climbed 24% to Rs 28,470 crore in the third quarter against Rs 22,990 crore in Q3 of the last fiscal. On the other hand, NII of ICICI Bank climbed to Rs 18678 crore in the third quarter against Rs 16,465 crore in Q3 of the last fiscal.

Total Deposits

Total deposits of HDFC Bank rose 27.7% to Rs 22,14,000 crore in the third quarter against Rs 17,33,200 crore in Q3 of the last fiscal. In case of ICICI Bank, deposits rose 18.7% to Rs 13,32,300 crore in the third quarter against Rs 1122000 crore in Q3 of the last fiscal.

Provision Coverage Ratio

The Provision Coverage Ratio (PCR) of HDFC Bank climbed to 75% in the last quarter against 73% in Q3 of the previous fiscal. The PCR of ICICI Bank fell to 80.7% in the last quarter against 82% in the December quarter of the previous fiscal.

STOCK MOVEMENT

HDFC Bank stock was trading at Rs 1420 today. The banking stock is trading neither in the oversold nor in the overbought territory as the relative strength index (RSI) of HDFC Bank stands at 41.1. The stock has fallen 9% in six months. Market cap of HDFC Bank fell to Rs 10.78 lakh crore amid a rally in the broader market today.

Total 2.12 lakh shares of the firm changed hands amounting to a turnover of Rs 30.14 crore on BSE. HDFC Bank stock has a one-year beta of 0.6. This signals the stock has low volatility.

The large cap stock is trading lower than the 5 day, 10 day, 100 day, 150 day and 200 day moving averages.

On the other hand, ICICI Bank stock was trading marginally higher at Rs 1061.50. The banking stock is trading neither in the oversold nor in the overbought territory as the relative strength index (RSI) of ICICI Bank stands at 61.6. Market cap of ICICI Bank stood at Rs 7.44 lakh crore amid a rally in the broader market today.

ICICI Bank stock has a one-year beta of 0.5. This signals the stock had low volatility during the period. The large cap stock is trading higher than the 5 day, 10 day, 100 day, 150 day and 200 day moving averages.

Here is a look at what brokerages and analysts said on the prospects of the banking stocks.

ICICI Bank Outlook

Mileen Vasudeo, Senior Technical Analyst at Arihant Capital Markets has a hold call on the banking stock with a target price of Rs 1,120-1,180. Stop Loss can be fixed at Rs 1,030

“We are observing a higher-top, higher-bottom formation on the daily charts of ICICI Bank. Further, the momentum indicator viz. RSI is positively poised and even the stock is outperforming the benchmark indices. Hence, one can hold the stock at current prices with a stop loss of Rs 1,030 for a target of Rs 1,120-1,180 levels in the next couple of months,” said Mileen Vasudeo.

Brokerage Deven Choksey Research has maintained its buy rating on the ICICI Bank stock. It has assigned a price target of Rs 1250 to the banking stock.

“ICICI Bank continues to operate within its strategic framework to strengthen its franchise and expand its technology and digital offerings. Maintaining high standards of governance, deepening coverage, and enhancing delivery capabilities are its focus areas for risk-calibrated profitable growth. We expect the cost-to-income ratio to be higher at 40.7% for FY24E as it will continue to invest in branch expansion and digital banking strategies. We have retained our FY24E/ FY25E earnings estimates. We have factored in a growth of 18.7% CAGR in profits over FY23–26E, 18.1% CAGR in advances, and 16.8% growth in operating profits over FY23–26E. We have maintained our ‘BUY’ rating on ICICI Bank's shares,” said Deven Choksey Research.

International brokerage Goldman Sachs has downgraded ICICI Bank shares to neutral from Buy.

HDFC Bank Outlook

Goldman Sachs has reiterated its 'Buy' call on HDFC Bank.

Antique Broking has revised its target downward to Rs 2,000 while assigning a buy call to the lender's stock.

"Overall performance was in line and we largely maintain our earnings estimate and marginally revise our target price to Rs 2,000 (2.5x FY26 BV and INR 202 for subsidiaries) vs Rs 2,050 earlier. Maintain BUY," said Antique.

"Post-merger, a relatively weaker liability construct is keeping NIMs lower as compared to the past, which is getting offset by high productivity, and lean cost of operations and low credit cost. Thus, RoAs are likely to be similar to pre-merger levels but with a different P&L flow. This could keep multiples lower than the historic averages as concerns can emerge with respect to (1) Growth, as a large balance sheet would have a higher correlation with the macroeconomic environment and (2) NIMs, as a relatively weaker liability mix may have a higher impact on liquidity conditions," the brokerage added.

BNP Paribas has referred HDFC Bank as its top banking pick amid deep correction post Q3 earnings. It has assigned a target of Rs 2,410 to the lender.

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"Our estimates of key fundamentals, including ROA and ROE, build in a considerable margin of safety by assuming an accelerated timeline for PSL asset build-up, muted CASA momentum and no expected savings in operating cost from merger synergies. Despite these conservative assumptions, we see ROA touching 1.9 per cent by end-FY25 and ROE nearing the pre-merger steady state of 17 per cent by 2HFY26," said BNP Paribas.

Nuvama Institutional Equities has lowered its target price while revising its earnings estimates downward for the lender.

"We are cutting earnings by 5–6 per cent for FY25E–FY26E. While the cut in core earnings is higher at 8 per cent due to a 4 per cent cut in loan growth, it is partially offset by an upward revision of non-core items. The Bank has exhausted its LCR, will need to lower its LDR and is running slower than guidance on deposit growth. In all, we are lowering the target to Rs 1,730 from Rs 1,770," said the brokerage. Nuvama has downgraded the stock to ‘hold’ after Q3 earnings.

Financial services firm Motilal Oswal has assigned a target of Rs 1950 to the banking stock. The lender is expected to report healthy return ratios in the coming years on the back of an improvement in NIMs, said Motilal Oswal.

HDFC Bank’s margin stood largely flat, which was slightly below the brokerage’s expectations, even as the bank deployed excess liquidity and significantly drew down the LCR ratio.

"Loan growth was healthy driven by growth in retail and continued traction in Commercial and Rural Banking. Asset quality ratios improved while provision coverage ratio (PCR) also inched up to 75 per cent. The Bank has continued to maintain 0.6 per cent buffer of floating plus contingent provisions, which provides additional comfort. Management suggested that NIMs will improve gradually over the coming years, which along with an improvement in operating leverage will enable the Bank to deliver healthy return ratios," the brokerage added.

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