Two of the country’s largest private banks declared their Q2 numbers recently. HDFC Bank finally closed the growth gap with its peers in Q2 FY26. According to the bank’s financial presentation, total advances i.e., all the loans the bank has given to retail, corporate, and small business customers rose 4.5% sequentially and 10.1% year-on-year. ICICI Bank, meanwhile, delivered 10.3% YoY and 3.2% QoQ loan growth. Which is a better now as we step into the second half of FY26?
Here is a blow-by-blow comparison of the Q2 performance of the two banks and what’s expected ahead-
HDFC Bank Vs ICICI Bank: Margins under pressure?
Net interest margin, the spread a bank earns on loans after paying for deposits is the clearest window into profitability. HDFC Bank’s NIM slipped 8 basis points sequentially to 3.49%, as per its Q2 statement.
BNP Paribas attributed the decline to a 21 bps fall in yield on interest-earning assets, partly offset by a 15 bps fall in cost of funds as expensive fixed deposits matured. Nuvama Institutional Equities, in its note, called the compression “in-line with expectations,” adding that “HDFC Bank’s cost of funds is falling slower than peers due to longer-duration liabilities.”
ICICI Bank fared slightly better. Its NIM was recorded at 4.30%, down only 4 bps quarter-on-quarter, as per the company’s filing.
Elara Securities said ICICI’s “margin resilience stems from a healthy CASA base and a disciplined pricing stance on term deposits.” Deven Choksey Research also noted that while sectoral funding costs are inching higher, “ICICI’s mix of retail and business-banking deposits offers a natural hedge.”
This meant that HDFC’s margins were still normalising after its merger and funding-cost realigning, while ICICI has managed to defend spreads thanks to its steadier liability profile.
HDFC Bank Vs ICICI Bank: Asset quality and credit cost
Both lenders kept asset quality firmly under control, though the underlying stories differ.
HDFC Bank’s gross non-performing asset (GNPA) ratio fell to 1.24% from 1.4% in the previous quarter, while net NPA (after provisions) was 0.4%, according to its investor deck.
Nuvama said slippages of new loans turning bad fell 18% QoQ, with a one-off “lumpy upgrade” equivalent to 10 bps of loans improving reported numbers. The brokerage pointed out that this upgrade also allowed the bank to release some provisions, bringing core credit cost down to 28 bps from 56 bps. Including contingency buffers, total credit cost was 52 bps, well below the 2.2% seen in the previous quarter.
ICICI Bank’s gross NPA ratio eased to 1.58% from 1.67%, and net NPA to 0.39% from 0.41%, as per its performance review.
Fresh slippages fell to Rs 5,034 crore from Rs 6,245 crore quarter-on-quarter, while recoveries and upgrades were Rs 3,648 crore. Its provision coverage remained at around 75%. Elara called the print “best-in-class among large banks,” highlighting a credit cost of roughly 0.26%, about half the level seen in FY25.
So, while HDFC’s credit numbers improved sharply due to one large upgrade, ICICI’s quality gains appeared more organic, coming from consistent recoveries and lower slippages.
HDFC Bank Vs ICICI Bank: Operating performance and profitability
Profitability for both banks stayed firm, though there were no major surprises this quarter. HDFC Bank’s standalone net profit rose 11 per cent year-on-year and 3 per cent sequentially to Rs 18,641 crore, driven by steady lending growth. Its net interest income (NII) the difference between what the bank earns on loans and what it pays for deposits, grew 4.8 per cent YoY to Rs 31,551 crore. Operating expenses inched up 3.1 per cent QoQ to Rs 17,980 crore, reflecting branch expansion and tech spends.
The bank’s pre-provision operating profit (PPOP) profit earned from core banking operations before setting aside money for bad loans rose only 4 per cent YoY and was flat sequentially, showing that higher costs offset much of the income growth.
ICICI Bank’s net profit stood at Rs 12,359 crore, a 5.2 per cent YoY increase but 3.2 per cent lower QoQ. Its NII was Rs 21,529 crore, up 7.4 per cent YoY, while non-interest income fees, commissions and treasury gains grew 13.2 per cent. The bank’s cost-to-income ratio rose to 40.6 per cent from 37.8 per cent, meaning that for every Rs 100 earned, it spent about Rs 41 on operations.
Despite rising costs, profitability metrics stayed healthy. Return on assets (RoA) how much profit the bank generates from every rupee of assets was 1.87 per cent for HDFC Bank and 2.33 per cent for ICICI Bank in Q2 FY26. Return on equity (RoE) profit earned on shareholders’ funds stood at 14.3 per cent and 16 per cent, respectively.
According to brokerage estimates and peer results tracked by Elara Securities and BNP Paribas Exane Research, most large private banks such as Axis, Kotak Mahindra and IndusInd reported RoA between 1.7–1.9 per cent and RoE between 13–15 per cent for the same period.
By that yardstick, both HDFC and ICICI are at or slightly above the large-bank average on profitability.
HDFC Bank Vs ICICI Bank: Capital adequacy and buffers strong
HDFC Bank’s Capital Adequacy Ratio (CAR) , a measure of how much capital the bank holds to absorb potential losses, stood at 20 per cent, with Common Equity Tier-1 (CET-1) capital at 17.9 per cent. These levels can give the bank ample headroom to expand its loan book without immediate fund-raising.
ICICI Bank reported a CAR of 17 per cent and CET-1 of 16.35 per cent, also well above the Reserve Bank of India’s minimum requirement of 11.5 per cent. Both banks additionally carry contingency and floating provisions extra reserves kept aside for unforeseen stress which further strengthen their balance sheets.
Both hold additional contingency and floating provisions roughly 1.4% of loans for HDFC and 1% for ICICI which analysts said acted as a meaningful shield against any macro shock.
HDFC Bank Vs ICICI Bank: Brokerage verdict
Nuvama Institutional Equities maintained a Buy on HDFC Bank, raising its target price to Rs 1,170 from Rs 1,135. It expects NIMs to recover from Q3 FY26 onwards as funding costs normalise, and believes the bank’s “superior asset quality and improving core earnings” will drive outperformance.
Additionally the same brokerage maintained its Buy rating on ICICI Bank with a target price of Rs 1,750, calling it the brokerage’s top pick among private lenders. The report said ICICI continues to demonstrate rare margin resilience and steady asset quality, even as credit costs have normalised sharply. Nuvama expects loan growth to pick up through the second half of FY26, supported by a healthy retail and business banking mix, and believes stable profitability could trigger a valuation re-rating in the coming quarters.
BNP Paribas Exane Research also maintained the Outperform rating on HDFC with a higher target of Rs 1,390, citing margin recovery potential and strong provision buffers. It noted that despite margin pressure, “the cost of funds easing and operating efficiencies led to a PAT beat.”
For ICICI Bank, Elara Securities retained its Buy rating with a target price of Rs 1,707, saying “earnings remain resilient and credit costs are under control.”
Deven Choksey Research kept an Accumulate with a target of Rs 1,593, arguing that the stock’s premium valuation is justified by “strong margins, robust balance sheet and sustained retail traction.”
HDFC Bank Vs ICICI Bank: Valuation check
At current levels, HDFC Bank trades near 2.7 times FY26 book value, while ICICI Bank trades around 2.5 times, based on brokerage estimates.
The valuation gap is narrow, but the earnings profile differs. HDFC’s near-term profitability is capped by compressed margins, though it benefits from a huge provision buffer and best-in-class credit quality. ICICI, on the other hand, delivers higher returns on assets and equity right now but at the cost of slightly higher operating expenses.
BNP Paribas summarised it best in its report. “Even under conservative assumptions, we see HDFC Bank’s ROE nearing its pre-merger steady state of 15% by FY27. Any positive surprise on CASA mobilisation could fast-track this recovery.”
HDFC Bank Vs ICICI Bank: What this means for investors?
Both banks entered the second half of FY26 on solid footing. HDFC Bank has largely stabilised after its merger integration phase. Its asset quality is pristine, its provision buffers are ample, and its loan growth has returned to double digits. The only drag is margin compression, which could ease from Q3 as the cost of funds declines.
ICICI Bank remained the steady compounder, with strong CASA, stable NIMs, and high return ratios. It’s a more predictable performer quarter to quarter, though valuations already reflect that strength. Those looking for steady margins and consistent profitability may prefer ICICI Bank. Those betting on a margin rebound and cleaner balance sheet leverage may find HDFC Bank’s risk-reward more compelling. Either way, both remained fundamentally sound and well-capitalised plays on India’s private-sector credit growth story just at different points on the profitability curve.
