Mixed Q3 Performance
The third quarter of fiscal year 2026 presented a mixed bag of results for HDFC Bank and ICICI Bank, prompting varied reactions from market analysts and investors
alike. While HDFC Bank reported an 11.5% year-on-year (YoY) increase in profit, reaching Rs 18,654 crore, some analysts expressed caution. ICICI Bank, on the other hand, saw a 4% YoY decline in net profit, attributed primarily to increased provisions. HDFC Bank demonstrated loan growth of 12% YoY and deposit growth of 11.6%, pushing its loan-to-deposit ratio (LDR) to 98.7%. However, the picture was not entirely rosy, as ICICI Bank's performance faced headwinds from higher provisions and a one-time impact. Despite these challenges, both banks displayed resilience, with HDFC Bank's net interest income (NII) growing by 6.4% and ICICI Bank's NII rising by 7.7%.
Analyst Outlooks Vary
Brokerage firms provided differing viewpoints on the banks' performances. MOFSL maintained a 'Buy' rating on HDFC Bank, expecting improved return ratios, with projected return on assets (RoA) and return on equity (RoE) of 1.9% and 14.5% respectively for FY27. Jefferies also reiterated a 'Buy' rating for HDFC Bank, increasing its target price, and CLSA maintained an 'Outperform' rating on ICICI Bank. Nuvama highlighted that HDFC Bank exceeded core pre-provision operating profit expectations, driven by higher core non-interest income and lower operating expenses. Elara Capital pointed out the challenges HDFC Bank faces in balancing growth with net interest margins (NIMs) and liquidity coverage ratio (LCR), while Elara Securities indicated that HDFC Bank's Q3 profit surpassed its estimates due to increased treasury income. Despite some areas of concern, many brokerages maintained a positive outlook, citing factors such as stable margins and improving deposit growth for ICICI Bank.
Market Sentiments and Shares
The market reacted to the Q3 results with some volatility, reflecting cautious optimism. Shares of both ICICI Bank and HDFC Bank traded in the red following the announcements. This profit booking resulted in a 3.6% intraday decline for ICICI Bank shares and a 1.2% dip for HDFC Bank shares on Monday. Analysts noted that the risk-reward profile for ICICI Bank had turned favorable, given its recent underperformance compared with the Nifty Bank, prompting some to reiterate their 'Buy' ratings. Elara Capital considered HDFC Bank's valuation attractive, trading at 1.9 times FY28 price-to-book value, and reiterated a 'Buy' recommendation with a specific target price. These reactions underscore the sensitivity of investor sentiment to quarterly earnings and the careful assessment of growth prospects.
Key Financial Highlights
Several key financial figures stood out in the Q3 reports. HDFC Bank's NII grew by 6.4% YoY to Rs 32,620 crore, with net interest margins (NIMs) expanding by 8 basis points quarter-on-quarter to 3.35%. ICICI Bank's NII rose 7.7% YoY to Rs 21,932 crore, supported by stable margins of 4.3%. For HDFC Bank, loan growth accelerated to 12%, driven by corporate and mortgage lending. Despite a 4% YoY decline in net profit, ICICI Bank demonstrated robust performance in NII. ICICI Bank reported that their deposit growth was below expectations. Gross NPA ratio for ICICI Bank declined to 1.53%, showing improved asset quality. Loan growth stood at 12 per cent YoY and 2.7 per cent QoQ for HDFC Bank, with management confident of outpacing system growth in FY27.
