India’s two biggest private sector banking stocks have split into sharply different market trades. 5% return so far in 2026 despite the blue-chip selloff.
HDFC Bank has lost 28%, making it one of the worst-performing stocks in the Nifty. Q2 results make it clearer that the divergence is not just about valuation as ICICI Bank is pulling ahead on loan growth, deposits, profitability and returns, while HDFC Bank is being valued as a recovery story after a prolonged correction.
ICICI Bank reported a 20% year-on-year (YoY) increase in second-quarter profit to Rs 14,800 crore. HDFC Bank’s profit rose 5% to Rs 19,500 crore.
HDFC remains the larger bank by earnings, but ICICI is expanding at almost twice the pace. ICICI Bank’s loans grew 30%, and deposits rose 27%.
4% after excluding FCNR(B)-related lending. 8%, but the bank’s retail funding momentum continues to lag its larger peers.
That gap is at the centre of the HDFC Bank debate. Anand Rathi said HDFC Bank has struggled to close the post-merger gap with ICICI Bank across key operating metrics.
With CASA growth continuing to trail loan growth, the brokerage expects it will take longer for HDFC Bank to narrow its funding cost disadvantage. ICICI Bank’s growth, however, has been partly fuelled by the mobilisation of around $18 billion in FCNR(B) deposits.
The bank deployed a substantial portion of the funds into loans, including a sharp increase in its overseas book. That helped accelerate the balance sheet but also created near term pressure on margins.
Overseas assets earn around 1%, compared with more than 4% on domestic assets. 18%, and management expects further moderation in the third quarter before recovery from the fourth quarter.
16%, down 10 basis points sequentially. Its margin pressure came from FCNR(B) flows, funding costs and a lower CASA ratio.
1% for ICICI Bank. The difference is that HDFC Bank’s margin recovery could become the next catalyst.
About 70% of its loan book is linked to floating rates, and analysts expect benefits from the recent rate hike, the deployment of FCNR(B) deposits and the run-off of high cost borrowings. Anand Rathi said HDFC Bank’s margins may have bottomed out.
It expects the bank’s return on equity to remain around 14% over the medium term, while maintaining a buy rating and a ₹966 price target. JM Financial has also upgraded HDFC Bank to buy from add, citing attractive valuations after the stock’s correction.
