The March 2025 quarter results of the two biggest private sector banks, HDFC Bank and ICICI Bank were keenly awaited by investors on Dalal Street at a time when the RBI has taken several steps to lower interest rates and revive growth in the broader economy. And during Thursday’s trade, HDFC Bank, the largest private sector bank, hit a 52-week high of Rs 1,919.4 while ICICI Bank, second largest private sector bank hit a 52-week high of Rs 1,408.6.
Performance in the March 2025 quarter
For a key performance metric, net interest margin (NIM), for HDFC Bank, its core net interest margin was 3.65% on interest earning assets in the fourth quarter of FY 25 vis-à-vis 3.63 per cent a year earlier. And in the case of ICICI Bank, its NIM was 4.41 % in the March 2025 quarter vis-à-vis 4.4 % a year earlier.
Meanwhile, HDFC Bank’s gross advances grew 5.4 % y-o-y to Rs 26.4 lakh crore in the fourth quarter of FY 25, and this was broadly in tune with earlier quarters. Nearest rival, ICICI Bank’s total advances grew much faster at 13.3 % y-o-y in the March 2025 quarter to Rs 13.41 lakh crore led by loans to corporates.
Asset quality of HDFC Bank, was more or less stable in the March 2025 quarter – HDFC Bank’s percentage of net NPAs to net advances was 0.43 % in the fourth quarter of FY25 vis-à-vis 0.33 % a year earlier. Similarly, ICICI Bank’s % of net non-performing customer assets to net customer was 0.39 % in the fourth quarter of FY25 vis-à-vis 0.42% a year earlier.
A tight check on operating costs, like employee costs declined nearly 12 % y-o-y to Rs 6,115 crore in the March 2025 quarter and that helped HDFC Bank’s standalone net profit rise 6.7 % y-o-y to Rs 17,616.1 crore in the quarter under review. ICICI Bank grew its standalone net profit nearly 18 % y-o-y to Rs 12, 629.6 crore in the March 2025 quarter.
ICICI Bank also had a superior return on assets (annualized) of 2.52 % for the March 2025 quarter while for HDFC Bank it was 1.94% in the quarter under review.
Outlook going forward
The RBI had cut repo rates by 25 basis points to 6 % in its monetary policy review earlier this month. Apart from RBI, global central banks like the ECB had also cut its rates this week, at a time when growth risks for the global economy have increased considerably with the tariff war that has been waged by the Trump administration over the past few weeks.
The RBI has also projected real GDP growth at 6.5 per cent for 2025–26 for the economy and that is broadly in tune with the previous financial year. To protect NIMs, HDFC Bank and ICICI Bank had recently cut interest rates on savings rates. In addition, higher cost fixed deposit schemes are also being curtailed.
ICICI Bank has also got approval to raise Rs 25,000 crore via non-convertible debentures in the local market and debt funds for $ 1.5 billion in the overseas market.
HDFC Bank has 9,455 branches at the end of FY 25 while ICICI Bank has 6,983 branches and they will play a key role in attracting low-cost deposits as well as growing the loan portfolio, going forward. Investors will also be closely monitoring if the current global trade war leads to a rise in bank NPA ratios here.
Investors are also awaiting details relating to the IPO of HDFC Bank subsidiary, HDB Financial Services.
Investors on Dalal Street
HDFC Bank with a P/E of nearly 21 times estimated standalone earnings for FY 26 while ICICI Bank trades at 19 times estimated standalone FY 26 earnings.
Clearly, both the leading bank stocks have factored in the growth prospects at the current juncture – investors could wait for a correction in these stocks before making an investment for the long-term.
Disclaimer
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
Disclosure: The writer and his dependents do hold the stocks discussed in this article.
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