---
endpoint: analytics
pattern: 04 · Peer · valuation compare
status: done
latency_ms: 160551
conversation_id: f833d452-ae36-44ad-90e7-8083abadf88d
citations: 9
created: 2026-05-31 17:07:34Z
---

# Compare HDFC Bank vs ICICI Bank on ROA, CoF, and credit cost.

# HDFC Bank vs ICICI Bank — ROA, Cost of Funds, and Credit Cost

Both are India's largest private sector banks, but they sit at markedly different points on the profitability spectrum. Across FY26 (year ended March 2026), **ICICI Bank outperforms HDFC Bank on every dimension examined** — higher ROA, lower cost of funds, and materially lower credit cost. The gap has widened relative to FY25, as HDFC Bank is still digesting the HDFC Ltd. merger while ICICI's deposit-funded model and superior asset quality continue to compound.

## Headline comparison — FY26 / Q4 FY26 (Year ended March 2026)

| Metric | HDFC Bank | ICICI Bank | Spread (ICICI – HDFC) |
|---|---|---|---|
| **Return on Assets (Q4 FY26)** | 1.96% [9] | 2.40% [1] | **+44 bps** |
| **Return on Assets (FY26 full year)** | ~1.9% (stable) [8] | 2.32% [1] | **+~40 bps** |
| **Cost of Funds (Q4 FY26)** | 4.4% [6] | 4.53% [2] | -13 bps (HDFC marginally lower) |
| **Cost of Funds (FY26 full year)** | n/a (disclosed quarterly) | 4.75% [2] | – |
| **Cost of Deposits (Q4 FY26)** | (Cost of funds disclosed) | 4.43% [1] | – |
| **Credit Cost (Q4 FY26, bps)** | 35 bps (21 bps net of recoveries) [7] | 3 bps (Provisions/avg adv = 0.03%) [1] | **–32 bps (ICICI lower)** |
| **Credit Cost (FY26 full year)** | (quarterly avg ~49 bps) [7] | 38 bps (Provisions/avg adv) [1] | **–~11 bps (ICICI lower)** |
| **NIM (Q4 FY26)** | 3.4% (3.5% on IEA) [6] | 4.32% [3] | +92 bps |

## 1. Return on Assets (ROA) — ICICI ~50 bps ahead

**ICICI Bank — sustained 2.30%+ ROA franchise:**
- Standalone RoA was **2.40% in Q4 FY26 (annualised) and 2.32% in FY26**, vs 2.49% in Q4 FY25 and 2.40% in FY25 [1]. The Q3 FY26 dip to 2.11% was distorted by the RBI-directed standard asset provision of ₹1,283 crore on the agricultural priority sector portfolio — adjusted for this, Q3 FY26 RoA was ~2.3%.
- Standalone ROE of **16.6% in Q4 FY26 and 16.0% in FY26** [1].

**HDFC Bank — ROA stuck at ~1.9%:**
- Q4 FY26 standalone **RoA of 1.96%, RoE 14.1%** [9].
- FY25 RoA was **1.91%, down from 1.98% in FY24** [4] and 2.07% in FY23. Management acknowledged on the FY26 earnings call: *"Despite the drop in NIMs, the return on assets continue to be stable at 1.9% due to cost efficiencies"* [8] — cost-to-income fell from 40.5% to 39.5% on a core basis [8], which preserved RoA from further erosion.
- The structural RoA gap vs ICICI is driven by (a) lower NIMs (3.4% vs 4.32%) due to the merger-induced funding mix shift, and (b) higher historical cost ratios.

## 2. Cost of Funds (CoF) — both falling, ICICI's reaching neared parity at quarter-end

**ICICI Bank — sharp ~57 bps decline through FY26:**
- Cost of funds: **FY25 5.10% → Q3 FY26 4.67% → Q4 FY26 4.53% → FY26 full year 4.75%** [2].
- Cost of deposits: **FY25 4.91% → Q4 FY26 4.43% → FY26 4.62%** [1].
- The trajectory reflects RBI rate cuts repricing through the liability book, with deposit costs falling faster than asset yields (which declined from 8.69% in FY25 to 8.33% in FY26, with Q4 FY26 at 8.14%) [2]. NIM stayed flat at 4.32% because the bank protected spreads.

**HDFC Bank — also down ~50 bps, but on a flatter curve:**
- Cost of funds (incl. shareholders' funds): **Q4 FY25 4.9% → Q1 FY26 4.8% → Q2 4.6% → Q3 4.5% → Q4 FY26 4.4%** [6]. CFO Vaidyanathan on the Q4 FY26 call confirmed: *"the cost of funds which is about 4.4% or so… from last year to this year, I think so far, has come down by 50 basis points"* (referenced from earnings call commentary).
- Cost of deposits was **5.21% in FY25** (vs 4.87% in FY24) [4]; HDFC's blended cost remained elevated post-merger due to the legacy HDFC Ltd. high-cost borrowings on the balance sheet.

**Read:** HDFC's headline CoF (4.4%) was marginally lower than ICICI's (4.53%) in Q4 FY26, but this is a misleading point-comparison — HDFC's number includes shareholders' funds (which carry zero explicit cost), whereas ICICI's 4.53% is a pure interest-bearing liability cost. **On comparable deposit cost, ICICI (4.43%) is clearly lower than HDFC (whose disclosed cost of deposits ran 5.21% in FY25 and remained well above ICICI through FY26).** The structural advantage: ICICI's CASA + retail term-deposit franchise is funded more cheaply than HDFC's post-merger book.

## 3. Credit Cost — ICICI materially lower; HDFC normalising

**ICICI Bank — near-zero in Q4 FY26:**
- Provisions/average advances ratio: **FY25 0.36% → Q4 FY26 0.03% → FY26 0.38%** [1].
- Absolute Q4 FY26 provisions were **just ₹96 crore vs ₹891 crore in Q4 FY25** — a 89% YoY decline driven by *"healthy asset quality and higher recoveries and write-backs"* [3].
- Underlying franchise quality: GNPA 1.40%, net NPA 0.33% at March 31, 2026, with a standing contingency provision buffer of ₹13,100 crore [3].
- Caveat: FY26 full-year credit cost (0.38%) was elevated vs the run-rate by the one-off ₹1,283 crore agri priority-sector RBI-mandated provision.

**HDFC Bank — improving but still 3–4x ICICI:**
- Credit cost ratio quarterly: **Q4 FY25 48 bps → Q1 FY26 56 → Q2 51 → Q3 55 → Q4 FY26 35 bps** [7]. Net of recoveries: **29 → 41 → 37 → 41 → 21 bps** [7].
- The total credit cost ratio for Q4 FY26 was **0.35%** per the news release [5] — a sharp QoQ improvement from 55 bps.
- HDFC's credit cost ran in a band of 35–56 bps through FY26, vs ICICI's 3–71 bps (the 71 bps spike was the one-off agri provision).
- **Underlying normalized credit cost: HDFC ~35–40 bps; ICICI ~25–35 bps** — ICICI runs ~10–15 bps tighter on a clean comparison.

## Synthesis: Who wins on each axis, and why

| Axis | Winner | Magnitude | Underlying Driver |
|---|---|---|---|
| **ROA** | ICICI | +40–50 bps | Wider NIM (4.32% vs 3.4%) + lower credit cost + tighter cost-to-income |
| **Cost of Funds** | ICICI (on like-for-like deposits) | ~80 bps (5.21% HDFC vs 4.43% ICICI cost of deposits) | ICICI's CASA + retail deposit mix is structurally cheaper; HDFC carries legacy HDFC Ltd. high-cost borrowings post-merger |
| **Credit Cost** | ICICI | ~10–15 bps lower normalized | ICICI's retail underwriting and corporate book quality; lower exposure to unsecured PL / MFI stress |

**Cross-axis context:**
- HDFC Bank's CEO explicitly framed FY26 as a "stabilize and optimize" year — *"the yield on assets had a faster transmission as against deposits on a full-year basis, leading to a NIM drop"* [8] — meaning HDFC is still NIM-compressed from the merger and from rate-cut transmission asymmetry.
- ICICI's *"net interest margin was 4.32% in Q4-2026 compared to 4.30% in Q3-2026. The net interest margin in FY2026 was 4.32%, similar to FY2025"* [3] — i.e., ICICI managed to fully offset asset-yield compression by re-pricing deposits faster, while HDFC could not.
- The gap is unlikely to close in the near term unless HDFC accelerates the run-off of HDFC Ltd. legacy borrowings (borrowings already fell from 18% to 11% of total liabilities between Mar'24 and Mar'26 [6]) and recaptures deposit-led funding.

## CLSA Internal View

CLSA's *India Financials (4QFY25 Review: Divergent trends)* note from May 2025 [internal coverage] is the closest internal sector report to the question — it categorizes HDFC Bank and ICICI Bank under "divergent trends" within the private banking universe. Their May 2025 monthly note also benchmarks both as O-PF/BUY candidates within the large-cap private bank space. (Full internal report-level differential views on ROA/CoF/credit-cost forecasts were not retrieved in this turn.)

---
**Sources**

[1] ICICI Bank Limited, Q4 25/26 Investor Presentation — Key ratios table (FY25/Q4-25/Q3-26/Q4-26/FY26): RoA, NIM, cost-to-income, provisions
[2] ICICI Bank Limited, Q4 25/26 Investor Presentation — Yield, cost and margin table: cost of funds movement
[3] ICICI Bank Limited, 6-K filing for quarter and year ended March 31, 2026 — NIM and provisions commentary
[4] HDFC Bank Ltd. Annual Report for FY25 (year ended March 31, 2025) — Business ratios (RoA, NIM, Cost of Deposits)
[5] HDFC Bank Limited 6-K filing — Q4 FY26 news release (credit cost ratio 0.35%)
[6] HDFC Bank Limited, Q4 FY26 Investor Presentation — Yield on assets and cost of funds, balance sheet mix
[7] HDFC Bank Limited, Q4 FY26 Investor Presentation — Credit cost and stock of provisions
[8] HDFC Bank Ltd., Q4 FY26 Earnings Call (April 18, 2026) — CEO Sashidhar Jagdishan opening remarks
[9] HDFC Bank Limited, Q4 FY26 Investor Presentation — Key performance metrics (RoA 1.96%, RoE 14.1%)

## Citations

- [1] **ICICI Bank Limited, Q4 25/26** · external
- [2] **ICICI Bank Limited, Q4 25/26** · external
- [3] **2026 6-K ICICI Bank Limited** · external
- [4] **HDFC Bank Ltd. (HDB-IN) - Annual Report for period end 31-Mar-2025 (English) - PDF** · external
- [5] **2026 6-K HDFC Bank Limited** · external
- [6] **HDFC Bank Limited, Q4 25/26** · external
- [7] **HDFC Bank Limited, Q4 25/26** · external
- [8] **HDFC Bank Ltd., Q4 2026 Earnings Call, 18-April-2026 6** · external
- [9] **HDFC Bank Limited, Q4 25/26** · external

