Did ICICI Bank perform better than its rivals in Q2?

The stock hits a new 52-week high $It was 1,361.4 on September 20, basically the same $It was 1,255.5 on Friday. The stock has outperformed rivals over the past year: it has gained 37%, while the benchmark Sensex has gained 24%. Meanwhile, HDFC Bank gained 16.7% during the period, while Axis Bank gained 24%. Is ICICI’s earnings better than its peers as well?

September quarter results

The impact of the high interest rate regime is obvious. ICICI Bank’s net interest margin in Q2 FY25 was 4.27% as compared to 4.53% in the same period last year.

Earlier, smaller rivals faced similar pressures. Kotak Mahindra Bank’s net interest margin in the second quarter of FY25 was 4.91% as compared to 5.22% in the same period last year. Axis Bank reported a net interest margin of 3.99% in the September quarter, compared with 4.11% in the same period last year.

However, larger rival HDFC Bank, the largest private sector lender, reported net interest margin on interest-earning assets of 3.65% in Q2FY25, compared with 3.6% in the year-earlier period.

To ICICI Bank’s credit, its loan growth has been quite strong even in a high interest rate environment. Total advances in September quarter increased 15% year-on-year $12.77 trillion, including strong growth in rural loans. HDFC Bank’s total advances grow at dismal 7% year-on-year $It was $25.19 trillion in Q2 FY25.

ICICI Bank’s asset quality is also quite stable. Its nonperforming customer net assets as a percentage of customer net assets was 0.42% in the second quarter of fiscal 2025, broadly similar to the levels reported in the prior year period.

Improved fund income and strong loan growth helped ICICI Bank’s standalone net profit rise 14.4% year-on-year $Revenue in the second quarter of fiscal 2025 was Rs 11,745.9 billion, which was better than expected.

Rival HDFC Bank’s standalone net profit grew only 5.3% year-on-year $Revenue for the quarter was Rs 16,820 crore, mainly due to increased expenses such as employee costs.

Growth prospects

Global central banks such as the Federal Reserve, Bank of England, and European Central Bank have recently cut interest rates. However, the RBI broadly hinted at its recent policy meeting that rate cuts in the domestic economy will still take some time as food and retail inflation remain above expected levels.

The domestic economy has shown signs of sluggishness over the past few months, with demand for four-wheelers dwindling and FMCG companies reporting sluggish demand in urban areas.

Nonetheless, the Indian economy is expected to grow by 6.5% to 7% in fiscal 2025, and private sector capital expenditure is expected to recover. Credit demand is expected to remain strong during the “busy” lending season currently underway.

ICICI Bank had over 6,600 branches as of end-H1FY25, which will play a key role in the ongoing ‘deposit war’ in the wider Indian banking system, helping it access low-cost CASA funding and expand its loan portfolio ,keep going.

Valuation

exist $At 1,255.5 per share, ICICI Bank’s stock trades at an effective P/E or P/E ratio of 18.5 times estimated standalone earnings for FY2025, while HDFC Bank trades at 19.5 times on a standalone basis. Kotak Mahindra Bank trades at 17.8 times on a standalone basis.

Note: The purpose of this article is simply to share interesting charts, data points, and thought-provoking perspectives. This is not advice. If you would like to consider investing, it is strongly recommended that you consult your advisor. This article is for educational purposes only.

Amriteshwar Mathur is a financial journalist with over 20 years of experience. The author’s mother has been a shareholder of ICICI Bank for nearly two decades.