ICICI Bank vs HDFC Bank vs Kotak Mahindra Bank: Q1 2024 Earnings Analysis and Future Outlook

As the financial markets closely monitored the Q1 earnings season, three leading private sector banks—ICICI Bank, HDFC Bank, and Kotak Mahindra Bank—have released their results. In this analysis, we delve into the performance metrics, growth trajectories, and future outlooks of these banks to determine which one appears more promising post-Q1 2024.

ICICI Bank’s Q1 2024 Highlights

ICICI Bank’s stock concluded Friday’s trading session with a 0.8% increase, reaching Rs 1,207.7, ahead of its quarterly results announcement. The stock remains close to its 52-week peak of Rs 1,257.7, achieved on July 11, 2024.

Key financial metrics from ICICI Bank’s Q1 results include:

• Net Interest Margins (NIM): ICICI Bank reported a NIM of 4.36% for Q1 FY25, down from 4.78% a year ago and 4.4% in Q4 FY24. This decline reflects the impact of the Reserve Bank of India's (RBI) measures to control high-margin unsecured lending and the competitive “deposit war” among banks.

• Loan Portfolio Growth: The bank’s net domestic advances grew by 15.9% year-over-year to Rs 11.88 lakh crore, driven by a 17.1% YoY increase in its retail loan portfolio.

• Credit Asset Quality: ICICI Bank maintained steady credit quality, with net non-performing assets (NPAs) at 0.43%, compared to 0.48% a year ago.

• Net Profit: The bank’s standalone net profit surged by 14.6% YoY to Rs 11,059 crore, surpassing analysts’ expectations.

HDFC Bank’s Q1 2024 Performance

HDFC Bank, the largest private sector bank post-merger with HDFC, reported:

• NIM: A slight increase to 3.66% in Q1 FY25 from 3.63% in Q4 FY24.

• Credit Quality: The net NPA ratio stood at 0.39% in Q1 FY25.

HDFC Bank’s Q1 results post-merger are not directly comparable to the previous year due to the consolidation with HDFC.

Kotak Mahindra Bank’s Q1 2024 Review

Kotak Mahindra Bank, known for its robust performance metrics, reported:

• NIM: A decrease to 5.02% in Q1 FY25 from 5.57% a year ago.

ICICI Bank’s Strategic Outlook

Looking ahead, ICICI Bank’s future performance will hinge on several factors:

• Interest Rate Environment: With food inflation remaining high, the RBI is likely to keep interest rates steady for the near term, impacting the bank’s interest income.

• Branch Network: The bank’s extensive branch network (6,587 branches as of June 2024) will be crucial for attracting low-cost deposits.

• Retail Loan Growth: Continued monitoring of retail loan growth and its contribution to overall earnings will be essential, especially with the RBI’s focus on curbing unsecured loan growth.

ICICI Bank’s ability to enhance its NIM amidst these challenges will be vital. Market expectations for a 6.5-7% growth in the broader domestic economy during FY25 suggest a favorable credit demand outlook, which could benefit ICICI Bank.

Share Price Performance Comparison

Over the past year, ICICI Bank’s stock has appreciated nearly 23%, outperforming its peers. In contrast:

• HDFC Bank’s share price has declined by 3.4%.

• Kotak Mahindra Bank’s share price has followed a similar downward trend.

ICICI Bank’s stock currently trades at a price-to-earnings (P/E) ratio of approximately 18 times its estimated standalone FY25 earnings, similar to HDFC Bank. However, HDFC Bank is still integrating operational synergies from its recent merger.

In conclusion, ICICI Bank has demonstrated robust performance in Q1 FY25, with strong loan growth and steady credit quality. Despite the challenges posed by”competitive pressures and regulatory measures, the bank’s strategic initiatives and extensive branch network position it well for future growth. Comparatively, HDFC Bank and Kotak Mahindra Bank have shown mixed results, with HDFC Bank focusing on post-merger integration and Kotak experiencing a decline in NIM. Investors should keep a close watch on these banks’ strategic developments and market conditions to make informed decisions.