Speaking to ET Now, Dnyanada Vaidya from Axis Securities highlighted that ICICI Bank’s provisioning sharply declined to just ₹96 crore this quarter, compared to ₹890 crore in the same period last year—well below both market and internal expectations.
“So, yes, of course, ICICI’s credit cost did come as a surprise. ₹96 crore was a very meaningful miss on street estimates as well as our estimates,” Vaidya noted. She attributed this decline primarily to reduced stress formation across both unsecured and secured loan segments, alongside a strong recovery pipeline in the corporate portfolio.
This combination, she said, reflects improving asset quality and strengthens confidence in the bank’s balance sheet. “So definitely is a positive,” she added, projecting that credit costs are likely to remain benign going forward, potentially staying below 50 basis points in FY27.
On the other hand, HDFC Bank’s performance, while largely in line with expectations, revealed a more cautious outlook. The bank has indicated that its loan growth in FY27 may not significantly outpace systemic credit growth—a signal that could temper market enthusiasm.
Vaidya explained that while credit growth has picked up, external pressures remain. “There are macro headwinds that are playing out, especially from the MSME segment point of view and some segments in the corporate book, especially the oil-sensitive sectors,” she said.
Rather than aggressively chasing growth, HDFC Bank appears focused on preserving asset quality and profitability. The bank has shifted its strategic emphasis toward return on assets (ROA), particularly given limited room for net interest margin (NIM) expansion. This involves tighter control over operating expenses and credit costs to sustain profitability.“Without denting ROAs, a positive play on operating efficiency—so lower opex ratios and controlled credit costs—should probably help sustain that ROA,” Vaidya said, adding that this explains the bank’s measured approach to credit expansion.
Despite this caution, there were few outright negatives in the results of either bank. ICICI Bank’s performance was described as “a very solid set of numbers,” likely to be reflected positively in its stock movement. However, HDFC Bank’s tempered guidance on future credit growth could introduce some near-term volatility.
On the deposits front, HDFC Bank remains focused on strengthening its liability franchise. The bank has set an ambitious goal of gaining 30 to 50 basis points in deposit market share annually. Vaidya believes this target is achievable, especially given recent improvements in its loan-to-deposit ratio (LDR), which has fallen below 95% following the merger integration.
“The management has also alluded to the fact that LDR will not be a constraint factor for credit growth in general,” she said. With a strong branch network and a renewed focus on sustainable deposit growth, the bank is expected to maintain a healthy balance between assets and liabilities.
Looking ahead, Vaidya expects deposit growth at HDFC Bank to outpace credit growth, with the LDR gradually declining to around 90% by FY28—further reinforcing balance sheet stability.
When asked about Yes Bank, Vaidya declined to comment, stating, “We do not cover the stock.”
Overall, while both banks delivered stable performances, ICICI Bank’s sharp improvement in asset quality and provisioning stands out as a key positive, whereas HDFC Bank’s cautious tone reflects a deliberate strategy to navigate ongoing macroeconomic challenges without compromising long-term profitability.