HDFC Bank vs ICICI Bank: Which stock is better bet for long-term investors?

As Indian banking stocks navigate a volatile market, Bernstein has backed HDFC Bank over ICICI Bank, citing its long-term resilience and narrowing Return on Assets (RoA) gap as key strengths. While ICICI Bank currently boasts stronger profitability, analysts believe HDFC Bank’s steady improvement could make it the more rewarding bet for long-term investors.

HDFC Bank vs ICICI Bank: How Bernstein views fundamentals

Bernstein has assigned an Outperform rating to HDFC Bank, setting a target price of Rs 2,300, which implies a 37 per cent upside from its current level of Rs 1,680. Although the bank has adopted a conservative loan-to-deposit strategy, slowing its loan growth, analysts argue that its long-term fundamentals remain solid. The bank’s RoA stands at 1.8 per cent, lower than ICICI Bank’s 2.4 per cent, but a gradual improvement in this metric could be a game-changer for its stock performance.

ICICI Bank has received a Neutral rating from Bernstein, with a target price of Rs 1,440, reflecting an 18 per cent upside from its current levels of Rs 1,220–1,225. The bank continues to outshine HDFC Bank in profitability and loan growth, with a higher RoA of 2.4 per cent. However, ICICI Bank’s Price-to-Book (P/B) ratio stands at 3x, compared to HDFC Bank’s 2.6x, making it relatively expensive and potentially limiting further upside.

ICICI Bank vs HDFC Bank: Growth vs sustainability

While ICICI Bank is leading in loan book expansion and profitability, Bernstein believes HDFC Bank’s RoA improvement and lower risk strategy could drive superior long-term returns. With India’s credit demand rising, both banks remain strong picks, but investors seeking a balance of growth and sustainability may find HDFC Bank the better option.

Verdict: HDFC Bank gets the edge for long-term investors

ICICI Bank offers higher returns in the near term, but analysts expect HDFC Bank’s improving RoA and stable growth to deliver better gains over time. Short-term traders may favour ICICI Bank, but long-term wealth creators could find HDFC Bank the stronger investment.