HDFC Bank and ICICI Bank, two of India's leading private sector lenders, have recently announced their Q1FY26 results, sparking debates among investors about which stock deserves a spot in their portfolio. Both banks have demonstrated strong financial performance, but their individual strengths and weaknesses need careful consideration.

HDFC Bank's Q1FY26 Performance

HDFC Bank reported a mixed performance for Q1FY26. On a standalone basis, the bank's net profit after tax (PAT) witnessed a healthy 12.24% year-on-year (YoY) jump, reaching ₹18,155 crore, supported by strong deposit mobilization and an increase in other income. However, the consolidated net profit saw a slight dip of 1.31% YoY to ₹16,258 crore.

The bank's net interest income (NII) grew by 5.4% YoY to ₹31,440 crore. However, its net interest margin (NIM) narrowed to 3.35% from 3.46% in the previous quarter, reflecting faster repricing of assets than deposits. The bank's asset quality saw a mild deterioration, with gross non-performing assets (GNPA) and net NPA (NNPA) rising marginally. GNPA stood at 1.4%, while the specific credit cost rose to 56bp from 48bp QoQ.

In a positive move, HDFC Bank's board has approved a special dividend of ₹5 per share, with the record date set for July 25. Additionally, the board has sanctioned the bank's first-ever bonus issue in a 1:1 ratio, granting shareholders one bonus share for each share they own. The record date for the bonus issue will be announced later.

ICICI Bank's Q1FY26 Performance

ICICI Bank delivered a strong performance in Q1FY26, with standalone PAT rising 15.5% YoY to ₹12,768 crore. Consolidated PAT increased 15.9% to ₹13,558 crore. The bank reported a 10.6% growth in NII to ₹21,635 crore.

ICICI Bank demonstrated a notable improvement in asset quality, with GNPA declining to 1.67% and NNPA to 0.41%, compared to 2.15% and 0.43% a year ago. Although NIM dipped slightly, the improvement in asset quality, healthy loan and deposit growth, and robust core profitability paint a fundamentally bullish picture.

Key Metrics Comparison

| Metric | HDFC Bank (Q1FY26) | ICICI Bank (Q1FY26) | | ----------------- | ------------------ | ------------------ | | Standalone PAT Growth (YoY) | 12.24% | 15.5% | | Consolidated PAT Growth (YoY) | -1.31% | 15.9% | | NII Growth (YoY) | 5.4% | 10.6% | | NIM | 3.35% | 4.34% | | GNPA | 1.4% | 1.67% | | NNPA | 0.47% | 0.41% |

Analyst Recommendations and Stock Forecasts

• HDFC Bank: Brokerage Nuvama maintains a 'Buy' rating on HDFC Bank and has raised its target price from Rs 2,195 to Rs 2,270. Antique also maintains a 'Buy' rating with a target price of Rs 2,270, citing an improved growth outlook and potential RoA expansion. Walletinvestor.com predicts the stock price can increase to INR 2,078.748 in one year.
• ICICI Bank: Goldman Sachs has raised its price target on ICICI Bank to INR 1,644.00 from INR 1,597.00, while maintaining a Neutral rating. UBS raised its price target on ICICI Bank to INR 1,720.00 from INR 1,680.00, while maintaining a Buy rating on the stock. CoinCodex estimates that ICICI Bank Limited (IBN) is anticipated to trade between $ 32.93 and $ 41.89 in 2025, leading to an average annualized price of $ 36.99.

The Verdict

Both HDFC Bank and ICICI Bank present compelling investment opportunities. HDFC Bank, despite a slight dip in consolidated profit and a narrowing NIM, boasts a strong brand, robust deposit growth, and a first-ever bonus issue, signaling confidence in its future performance. ICICI Bank, on the other hand, showcases superior profit growth, improving asset quality, and a higher NIM.

Ultimately, the choice between HDFC Bank and ICICI Bank depends on individual investment preferences and risk appetite. Some analysts recommend investment in both the stocks. ICICI Bank may appeal to investors seeking higher growth and improved asset quality, while HDFC Bank may be favored by those prioritizing stability and brand value.