India’s top two private sector banks, HDFC Bank and ICICI Bank, released their Q1 FY25 earnings, offering a crucial glimpse into the evolving dynamics of the banking sector post interest rate tightening. While both banks posted steady loan and deposit growth, pressure on net interest margins (NIMs) and a moderate rise in provisions weighed on profitability. Investors and analysts are now dissecting the results for cues on sectoral resilience and earnings momentum.
HDFC Bank: Cautious Optimism with Eyes on Synergy Gains
Key Highlights:
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Net Profit: ₹17,632 crore (up ~35% YoY)
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Net Interest Income (NII): ₹29,050 crore (up 3.7% YoY, below estimates)
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NIMs: Fell slightly to 3.4% from 3.6% sequentially
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Loan Book: ₹26.5 lakh crore (up 13.3% YoY)
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Deposits: ₹23.8 lakh crore (up 16.5% YoY)
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Gross NPA: Stable at 1.26%, Net NPA at 0.33%
Insights:
The bank’s performance reflects synergy consolidation post its mega-merger with HDFC Ltd. While loan and deposit growth remain healthy, the muted NII growth signals margin compression due to rising deposit costs. HDFC Bank is still undergoing internal alignment and tech integration, which may weigh on near-term efficiencies.
Management View:
HDFC Bank’s CFO stated that merger-related cost normalisation will be completed in the next two quarters, after which profitability metrics should improve.
ICICI Bank: Focused Execution, Margin Squeeze
Key Highlights:
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Net Profit: ₹10,636 crore (up ~22% YoY)
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NII: ₹19,093 crore (up 8% YoY)
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NIMs: Declined to 4.38% from 4.43% QoQ
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Loan Book: Grew 17.9% YoY, led by retail and SME segments
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Deposits: Rose 19.5% YoY
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Gross NPA: 2.76%, Net NPA at 0.43%
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Provisions: ₹1,250 crore (down 8% YoY)
Insights:
ICICI Bank continued its trajectory of prudent risk management and credit discipline, with consistent traction in retail lending. The fall in NIMs reflects intensifying competition for deposits, but the bank’s superior cost control and stable asset quality offer comfort.
Management Commentary:
Top executives reiterated a focus on digital growth, retail granularity, and cross-cycle credit resilience, especially in unsecured retail and business banking.
Expert Opinions
Rahul Bajaj, Banking Analyst at Axis Securities:
“The fall in NIMs was expected, but strong credit growth and stable NPAs provide enough room for optimism. ICICI remains operationally leaner, while HDFC will take 1–2 quarters to fully realise merger synergies.”
Ritika Sharma, Vice President – Financial Sector, Nuvama Wealth:
“HDFC Bank’s results are not alarming, but operational efficiency will be closely watched. Margin trends for both banks hint at peaking deposit costs, which could stabilise in H2.”
Stock Market Reaction
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HDFC Bank stock traded flat in early hours post-results, indicating cautious sentiment.
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ICICI Bank stock gained slightly as investors reacted positively to lower provisioning and better growth metrics.
Conclusion
Both HDFC Bank and ICICI Bank have navigated Q1 FY25 with healthy balance sheet growth and stable credit profiles. While NIM pressure is a shared theme, the outlook remains constructive given improving macro conditions and a likely pause in rate hikes. Investors will now monitor digital growth execution, cost normalisation, and guidance on unsecured loan segments in the upcoming quarters.
