ICICI Has Margin Edge Over HDFC

Margin compression has emerged as a shared pain for HDFC Bank Ltd and ICICI Bank Ltd. In the June quarter (Q1FY26), net interest margin (NIM) fell 11 basis points (bps) sequentially to 3.35% for HDFC Bank and 12 bps to 4.27% for ICICI Bank.

- Manish Joshi

HDFC Bank reported NIM net of interest on income tax refunds, while we have adjusted ICICI Bank's NIM accordingly to make it comparable.

Though margin pain is likely to persist for both banks, ICICI Bank is on firmer footing as its NIM is nearly 90 bps higher. This simply means that as interest-earning assets grow for both banks, it is likely that the growth in net interest income (NII) will be faster for ICICI Bank owing to its higher margin. Its profit growth should be faster, too.

The 100 bps cumulative repo rate cut by the Reserve Bank of India so far has already eroded NIM for both banks to some extent; the full impact is yet to be felt as a 50 bps cut was announced in June. Further cuts to the repo rate could be in the offing as inflation remains benign.