ICICI Bank vs HDFC Bank: Why ICICI Bank Outperformed in 5 Years

HDFC Bank is significantly larger than ICICI Bank. At the end of June 2026, HDFC Bank had gross advances of about ₹30.61 lakh crore and deposits of ₹31.71 lakh crore. ICICI Bank, in comparison, had advances of ₹16.31 lakh crore and deposits of ₹18.34 lakh crore. In lending terms, ICICI Bank is only a little over half HDFC Bank's size.

Yet their shareholders have experienced a very different five years.

Over the last five years, ICICI Bank shares have risen more than 85% in absolute terms, while HDFC Bank shares fell around 7%. That is a striking divergence, especially because HDFC Bank continues to have the larger loan book, deposit franchise and absolute profits.

So the more interesting question is not which bank is bigger.

It is this: Why has ICICI Bank delivered substantially stronger shareholder returns despite being almost half HDFC Bank's size?

The answer lies in how the two businesses have changed. ICICI Bank has combined faster growth with stronger margins and a major improvement in asset quality, while HDFC Bank has spent the last few years adjusting the economics of a much larger balance sheet following its merger with HDFC Ltd.

ICICI Bank vs HDFC Bank: How Do Their Businesses Compare?

HDFC Bank still has a clear advantage when it comes to scale, but ICICI Bank currently has the edge on several growth and profitability metrics.

HDFC Bank's loan book is nearly 88% larger than ICICI Bank's, while its deposit base is about 73% larger. It also earns more absolute net interest income and profit.

But size is not where the most interesting difference lies. ICICI Bank's advances grew 19.6% YoY in Q1 FY27, compared with 15.4% growth in HDFC Bank's gross advances. ICICI Bank's NII grew 12.7%, compared with 6.7% for HDFC Bank.

HDFC Bank is therefore still the much larger business, but ICICI Bank's core lending and interest-income engines are currently expanding faster.

The 5-Year Return Gap Is Really a Business Transformation Story

A stock does not outperform simply because the underlying company is larger.

What matters is whether earnings, profitability and business quality improve relative to what investors had already expected.

That distinction becomes particularly important in this comparison. HDFC Bank entered the period as one of India's most established private-sector banks, with strong asset quality, consistent execution and a large deposit franchise.

ICICI Bank had significantly more room to improve. And it did.

One of the clearest examples is asset quality. ICICI Bank's net NPA ratio stood at 1.16% in June 2021. By June 2026, it had fallen to just 0.35%.

That is an important change for a bank.

When loans turn bad, banks have to set aside money against potential losses. Lower stressed assets can therefore reduce the drag from provisions and make the underlying earnings of the business more valuable.

ICICI Bank has not simply grown its balance sheet over the past five years. It has grown while substantially improving the quality of that balance sheet.

That helps explain why investors have treated the stock very differently.

ICICI Bank's Growth Is Coming From More Than Retail Loans

ICICI Bank's 19.6% overall loan growth also becomes more interesting when we look underneath it.

Its retail portfolio grew 12% YoY, while business banking grew 28.2%, rural banking increased 35.4% and domestic corporate loans expanded 18.5%. Retail still accounted for about 49.2% of the overall loan portfolio.

This means ICICI Bank's growth is becoming increasingly broad-based.

Retail remains the largest part of the business, but business banking, rural lending and corporate credit are growing substantially faster.

HDFC Bank is seeing a similar shift.

According to its Q1 FY27 investor presentation, retail loans stood at ₹16.32 lakh crore and grew 7.2% YoY. Small and mid-market loans increased 18.7%, while corporate and other wholesale loans grew 18.6%.

Within small and mid-market lending, HDFC Bank's business banking portfolio expanded an even faster 22.3% YoY to about ₹4.82 lakh crore.

So both banks are increasingly finding growth outside traditional retail banking. The difference is that ICICI Bank's overall loan book is currently growing faster.

ICICI Bank's Biggest Advantage Today Is Profitability

This is where the business comparison becomes much more interesting. ICICI Bank reported a net interest margin of 4.36% in Q1 FY27.

HDFC Bank's Q1 FY27 investor presentation reported a NIM of 3.26% on total assets.

Net interest margin measures how much a bank earns from its interest-generating assets after accounting for the interest it pays to fund them.

A difference of around one percentage point can be significant when applied across balance sheets measured in tens of lakh crore.

ICICI Bank therefore has a much smaller lending book but is currently earning a meaningfully higher interest spread on its business.

That is one of the clearest explanations for why comparing only absolute NII or profit can be misleading.

HDFC Bank earns more because it is much larger. ICICI Bank currently earns more efficiently relative to the size of its balance sheet.

Return Ratios Make the Difference Even Clearer

HDFC Bank reported a return on assets of 1.85% and return on equity of 13.8% in Q1 FY27.

These are still healthy profitability levels for a large bank. But they also help illustrate why HDFC Bank's huge balance sheet has not automatically translated into proportionately stronger shareholder returns.

The size of a bank tells us how many assets it controls. Return on assets tells us how effectively those assets generate profit. This distinction is central to the five-year stock performance gap.

ICICI Bank's re-rating over the past several years has been supported by a combination of falling stressed assets, healthy margins and stronger returns from its banking franchise.

HDFC Bank's challenge has been different. It has had to restore profitability metrics after becoming substantially larger through the HDFC Ltd merger.

Deposits Help Explain ICICI Bank's Margin Advantage

Banks need deposits and other funding to support their lending. But all deposits do not cost the same.

ICICI Bank's period-end deposits reached ₹18.34 lakh crore in June 2026, growing 14% YoY. Its average CASA ratio stood at 38.1%.

CASA refers to current-account and savings-account deposits, which generally provide cheaper funding than term deposits.

HDFC Bank's period-end deposits were substantially larger at ₹31.71 lakh crore, growing 14.7% YoY.

But its CASA ratio was 32% in June 2026, according to its investor presentation, down from 34% in March 2026 and 34% in June 2025. The composition underneath that deposit growth is even more revealing.

HDFC Bank's period-end time deposits grew 17.4% YoY, substantially faster than overall deposits. Average time deposits increased 14.3%, while average CASA deposits grew 11.2%.

This does not mean deposit growth is weak. HDFC Bank added more than ₹4 lakh crore of period-end deposits over the year.

The issue is the price of that growth. If expensive time deposits grow faster than cheaper CASA deposits, improving margins becomes more difficult.

The HDFC Ltd Merger Changed the Equation

This funding issue makes more sense when we go back to the merger with HDFC Ltd. HDFC Ltd merged into HDFC Bank effective July 1, 2023.

The transaction gave HDFC Bank an enormous mortgage portfolio and created a much larger financial institution.

But scale came with a trade-off.

HDFC Ltd was fundamentally a housing-finance company rather than a bank. Its balance sheet relied much more heavily on borrowings, whereas traditional banks have access to current and savings accounts as cheaper sources of funding.

After the merger, HDFC Bank therefore had to gradually reshape the funding side of a much larger balance sheet.

The progress is visible in one particularly important metric. Borrowings accounted for 18% of total liabilities in September 2023. By June 2026, that had fallen to 11%.

At the same time, HDFC Bank has continued expanding deposits.

This is important because it shows that the post-merger adjustment is already taking place. But the process takes time.

HDFC Bank Still Generates More Profit, But ICICI Is Growing Faster

HDFC Bank generated ₹19,060 crore of standalone PAT in Q1 FY27, compared with ICICI Bank's ₹14,805 crore.

So in absolute earnings, HDFC Bank remains comfortably ahead. But reported growth tells a different story.

ICICI Bank's PAT increased 15.9% YoY. HDFC Bank's reported PAT rose 5.0% YoY, from ₹18,160 crore to ₹19,060 crore.

However, that headline comparison needs adjustment.

HDFC Bank's own investor presentation provides an adjusted Q1 FY26 profit figure after removing the impact of HDB Financial Services transaction gains, certain provisions and a tax credit.

On this adjusted basis, HDFC Bank's Q1 FY27 PAT growth was 9.8% YoY. That is a much fairer comparison than simply using the reported 5%.

Even after making that adjustment, however, ICICI Bank's 15.9% profit growth remains faster.

The same difference is visible in core interest income. ICICI Bank's NII increased 12.7%, while HDFC Bank's increased 6.7%.

So HDFC Bank still produces more rupees of earnings, but ICICI Bank is currently growing those earnings faster.

HDFC Bank's Scale Remains a Huge Advantage

The stock-return gap should not be interpreted as HDFC Bank having a weak banking franchise. Far from it.

Its ₹30.61 lakh crore gross loan book is nearly twice ICICI Bank's. Its ₹31.71 lakh crore deposit franchise is about ₹13.4 lakh crore larger. And HDFC Bank continues to expand its physical distribution network.

The bank had 9,694 branches at the end of June 2026. Its capital position also gives it considerable capacity to grow.

HDFC Bank's capital adequacy ratio stood at 19.6%, including a CET1 ratio of 17.4%. ICICI Bank's overall capital adequacy ratio was 16.84%.

HDFC Bank therefore has scale, distribution, funding capacity and capital on its side. The debate is not about whether HDFC Bank has a strong franchise. It clearly does. The question is how efficiently that franchise can generate incremental earnings.

Asset Quality Is Strong for Both Banks

The gap between the two banks is also much smaller when it comes to current asset quality.

HDFC Bank reported a gross NPA ratio of 1.17% in Q1 FY27. ICICI Bank's gross NPA ratio stood at 1.38%.

On net NPAs, the order reverses. ICICI Bank reported a net NPA ratio of 0.35%, compared with 0.41% for HDFC Bank.

These are strong numbers for both banks. The more interesting part of the comparison is therefore not their current NPA ratios but how dramatically ICICI Bank's position has changed.

Its net NPA ratio has fallen from 1.16% in June 2021 to 0.35% in June 2026. That improvement has allowed investors to look at ICICI Bank very differently from five years ago.

Why ICICI Bank's 85%+ Return Now Makes More Sense

Put these numbers together and the stock-return divergence becomes easier to explain.

ICICI Bank did not outperform because it overtook HDFC Bank in size. It did not. Instead, ICICI Bank improved the economics and quality of its business.

Asset quality became substantially stronger. Margins remained high. Lending growth accelerated. Growth broadened beyond retail. Net interest income expanded faster.

ICICI therefore moved from being a bank investors expected to improve to one demonstrating that improvement in its numbers.

HDFC Bank faced a different journey. Its franchise was already regarded as strong. The HDFC Ltd merger then dramatically increased the size of the bank but temporarily complicated the balance-sheet economics.

In simple terms, HDFC Bank's balance sheet became significantly bigger before its profitability could fully catch up.

That helps explain why ICICI Bank shares have risen more than 85% over the past five years while HDFC Bank shares have fallen around 7%.

But ICICI Bank Now Faces Its Own Test

The conditions that helped ICICI Bank outperform also create higher expectations. Its loan portfolio grew 19.6% YoY in Q1 FY27, while deposits increased 14%.

Loans growing faster than deposits is not automatically a problem, particularly over short periods. But the gap matters because banks ultimately need funding to support credit growth.

If loans continue to grow materially faster than deposits, ICICI may eventually need to compete more aggressively for funding.

That can increase deposit costs and put pressure on margins. So the next phase of ICICI Bank's story is different from the previous five years.

The earlier question was whether ICICI could clean up the balance sheet and improve profitability. The question today is whether it can preserve those advantages while growing rapidly.

What Should Investors Track Next?

• HDFC Bank's NIM: The bank's NIM stood at 3.26% in Q1 FY27. A sustained improvement would indicate that the economics of the post-merger balance sheet are strengthening.
• HDFC Bank's CASA ratio: CASA stood at 32% in June 2026, compared with 34% a year earlier. Reversing this decline could help reduce funding costs.
• HDFC Bank's return ratios: Q1 FY27 RoA stood at 1.85% and RoE at 13.8%. Improvement here would indicate that its huge balance sheet is generating better returns.
• ICICI Bank's deposit growth: Loans grew 19.6% while deposits grew 14%. The gap becomes increasingly important if it persists.
• Asset quality: Both banks currently have low NPAs. Preserving that asset quality while maintaining double-digit lending growth will be critical.

Author's Take

The most important lesson from the last five years is that business size and shareholder returns are not the same thing.

HDFC Bank still has the larger franchise. It has almost twice ICICI Bank's gross advances, substantially more deposits, greater absolute profits, a larger branch network and a stronger capital cushion.

But ICICI Bank's advantage has been the direction in which its business moved. It reduced bad loans substantially, maintained strong margins, broadened lending growth and expanded earnings from a much cleaner balance sheet.

Investors were therefore not simply paying for ICICI Bank becoming bigger. They were valuing a business that had become materially better.

HDFC Bank has faced almost the reverse challenge. The HDFC Ltd merger gave it enormous scale, but the bank then had to rebuild the funding economics needed to make that scale work efficiently.

There are already signs of progress. Borrowings have declined materially as a share of liabilities, deposits continue to grow and the bank remains exceptionally well capitalised. But CASA, margins and return ratios still show why the post-merger normalisation remains important. That is what makes this comparison particularly interesting now.

HDFC Bank still has the larger machine. ICICI Bank has made its smaller machine work harder for shareholders over the last five years. The next phase will depend on whether HDFC can extract more profitability from its scale while ICICI preserves the efficiency that helped drive its outperformance.