Introduction
India’s leading private sector lenders—HDFC Bank and ICICI Bank—have announced their financial results for the first quarter of FY26. As the Indian banking sector continues navigating global economic challenges, interest rate movements, and domestic regulatory changes, investors were closely watching the Q1 numbers of these two giants. The results highlight a stable financial performance, consistent growth in net interest income, improved credit uptake, and—importantly—containment of asset quality risks, as both banks reported slippages to remain rangebound.
This article delves into the detailed financials of HDFC Bank and ICICI Bank for Q1FY26, analyzes their key metrics, and provides a comparative perspective on the strategies adopted by both banks to maintain stability amid economic uncertainties.
HDFC Bank Q1FY26 Results: Key Highlights
1. Net Profit Decline Marginal, But Expected
HDFC Bank posted a net profit of ₹16,258 crore, marking a 1.31% year-on-year decline. While some investors reacted cautiously to the decline, analysts attribute it to base effect post-merger with HDFC Ltd and rising provisioning requirements.
2. Net Interest Income (NII) Sees Growth
- NII rose by 4.7% YoY to ₹29,040 crore, indicating steady loan book expansion.
- The bank reported an NIM (Net Interest Margin) of 3.4%, slightly lower than the previous quarter due to higher funding costs.
3. Advances and Deposits: Stable Expansion
- Total advances grew 13.5% YoY to ₹23.4 lakh crore.
- Retail loans led the growth, particularly in home loans and vehicle finance.
- Deposits increased 11.8% YoY, reaching ₹22.2 lakh crore.
4. Asset Quality: Slippages Rangebound
One of the most critical data points from HDFC Bank’s earnings call was the controlled slippage ratio, which remained steady at 0.4%.
- Gross NPA stood at 1.24%, showing only a marginal increase.
- Net NPA remained below 0.35%, reflecting solid recovery mechanisms and provisioning.
5. Cost-to-Income Ratio
- The bank’s cost-to-income ratio increased to 44.5%, partly due to investments in tech and infrastructure post-merger integration.
6. Commentary from Management
HDFC Bank’s CFO, Srinivasan Vaidyanathan, remarked, “We have successfully contained slippages, and credit quality remains within our target range. We remain cautiously optimistic for the remainder of FY26.”
ICICI Bank Q1FY26 Results: Key Highlights
1. Net Profit Registers Strong Growth
ICICI Bank delivered a strong Q1 performance with a net profit of ₹11,278 crore, reflecting a 17.5% increase YoY, beating street estimates.
2. Net Interest Income and Margins
- NII rose by 9.2% YoY to ₹20,171 crore, driven by a robust retail and SME loan book.
- The NIM stood at 4.08%, reflecting superior interest management compared to peers.
3. Advances & Deposit Mobilization
- Advances grew by 18.6% YoY, particularly led by unsecured retail and SME loans.
- The deposit base expanded 13.4%, with improved CASA (Current Account Savings Account) performance.
4. Asset Quality: Slippages in Check
ICICI Bank reported gross NPA at 2.10%, marginally better than last quarter, while net NPA was at 0.41%.
- Fresh slippages during Q1FY26 were ₹3,780 crore, significantly down from Q4FY25.
- The bank maintained a provision coverage ratio of 82%.
5. Fee Income and Other Revenues
- Non-interest income grew 12.5% YoY.
- Retail fee income contributed over 70% of total fees, boosted by digital services.
6. Management Insights
Sandeep Bakhshi, CEO of ICICI Bank, stated, “Our focus on granular growth, superior risk assessment, and digital transformation is yielding results. Slippages have been well managed, and we are confident of sustaining asset quality.”
Comparison: HDFC Bank vs ICICI Bank – Q1FY26
| Parameter | HDFC Bank | ICICI Bank |
|---|---|---|
| Net Profit | ₹16,258 crore (↓1.31%) | ₹11,278 crore (↑17.5%) |
| NII | ₹29,040 crore (↑4.7%) | ₹20,171 crore (↑9.2%) |
| NIM | 3.4% | 4.08% |
| Gross NPA | 1.24% | 2.10% |
| Net NPA | <0.35% | 0.41% |
| Slippages | Stable at 0.4% | ₹3,780 crore (↓QoQ) |
| Loan Growth | 13.5% YoY | 18.6% YoY |
| Deposits Growth | 11.8% YoY | 13.4% YoY |
Both banks showcased robust fundamentals, but ICICI Bank outperformed HDFC Bank in profitability and margin terms for the quarter. HDFC Bank’s performance was weighed down by merger-related cost escalations and a slightly muted margin profile.
Sector-Wide Trends Reflect in Numbers
The Q1FY26 performance of these two top private banks reflects several broader banking sector trends:
1. Margin Pressure Amid Costlier Deposits
RBI’s consistent pause on repo rate hikes hasn’t entirely eased pressure on banks’ cost of funds. Deposit repricing is weighing on margins.
2. Retail Credit Driving Growth
Banks are doubling down on retail lending, especially in the home loan and personal loan segments, to drive growth amid slow corporate credit off-take.
3. Slippages Stabilizing
After the pandemic-induced volatility in asset quality, banks have significantly strengthened their risk assessment tools. As a result, slippages are now stabilizing, and provisioning levels are becoming more predictable.
4. Digital Push Reducing Operational Costs
Digital transformation has been a significant enabler for both ICICI and HDFC Bank. From mobile banking to AI-based loan underwriting, tech is now a growth engine.
Outlook for FY26
HDFC Bank
Analysts believe HDFC Bank is entering a consolidation phase post its merger with HDFC Ltd. While margins may remain under pressure in the short term, the long-term synergy benefits from mortgage and retail business integration are expected to boost profitability.
Brokerage View: Jefferies maintains a “BUY” rating with a price target of ₹2,050, citing long-term upside post merger adjustments.
ICICI Bank
ICICI Bank is likely to continue its outperformance due to its superior loan mix, higher NIM, and strong capital adequacy. The bank is also expected to benefit from continued investment in digital transformation.
Brokerage View: Morgan Stanley rates ICICI Bank as “OVERWEIGHT” with a price target of ₹1,300, citing consistent RoE delivery and lower-than-peers NPAs.
Investor Takeaways
- For HDFC Bank investors: Short-term volatility due to merger costs and marginal NIM pressure may persist. Long-term investors can look at the stock for its steady franchise and vast retail reach.
- For ICICI Bank investors: A relatively more aggressive and nimble approach is visible. Strong Q1FY26 results reinforce its position as a growth leader among private lenders.
- Dividend Outlook: Both banks are expected to maintain a stable dividend payout, with improved profitability anticipated in the coming quarters.
