HDFC Bank, ICICI Bank Q1: Margin Pressure Eases, Alpha Score Diverges

HDFC Bank and ICICI Bank reported first-quarter results Friday, with both showing signs that the margin squeeze that defined the last two quarters is starting to ease. The divergence in AlphaScala's proprietary scoring tells a more nuanced story.

HDFC Bank posted net interest income of ₹28,475 crore, up 9% from a year earlier, driven by loan growth in the retail and commercial segments. Net interest margin held at 3.4%, flat from the March quarter, after four consecutive quarters of compression. Provisions fell 12% sequentially, helping net profit rise 8% to ₹16,475 crore.

ICICI Bank reported net interest income of ₹21,340 crore, up 11% year-on-year, with margins steady at 4.3%. Fee income grew 14%, and asset quality improved, with gross non-performing loans falling to 1.8% from 2.1% a year ago. Net profit rose 12% to ₹12,100 crore.

The AlphaScala scores reflect the different risk-reward profiles. HDFC Bank carries a score of 44 out of 100, labeled Mixed, while ICICI Bank scores 57, labeled Moderate. The gap stems from ICICI's stronger fee-income mix and lower credit costs, traders said.

Both banks face the same macro headwind: deposit costs are sticky even as the Reserve Bank of India's liquidity measures push short-term rates lower. HDFC Bank's higher proportion of bulk deposits makes it more sensitive to that stickiness, analysts at a Mumbai-based brokerage said.

Central Bank of India also reported Friday, with net profit rising 13% to ₹1,324 crore, helped by a 20-basis-point improvement in its net interest margin to 3.2%.