ICICI vs HDFC vs Axis Bank: Which bank stock is best for your portfolio?

Bank stock to buy: While analysts like ICICI Bank's unblemished report card for Q1FY26, they see HDFC Bank emerging as a stronger franchise over long-term. Axis Bank's weak Q1 has left if off radar

ICICI Bank vs HDFC Bank: With the June quarter numbers of HDFC Bank, ICICI Bank, and Axis Bank out, analysts have picked out their favourites in the backdrop of the results for the first quarter of the current financisl year (Q1-FY26) and the ensuing guidance.

 

While analysts like ICICI Bank's unblemished report card for Q1FY26, they see HDFC Bank having moats to emerge as a stronger franchise over the long-term.

 

In contrast, Axis Bank emerged as the weakest performer during the quarter, leaving it off analysts' radar.

 

As an investment bet, they see limited room for re-rating for ICICI Bank stock over the long-term as most positives are already in the price. HDFC Bank, in this regard, could be an “opportunity” bet for investors, they believe.

 

"While ICICI Bank delivered the strongest performance in Q1FY26, we see limited room for further re-rating as its consistent outperformance appears largely priced in. A meaningful re-rating would likely require a systemic credit growth acceleration, which looks challenging in the near term," said Rohan Mandora, associate director at Equirus Securities.

 

In contrast, HDFC Bank, he said, offers a better risk-reward with visible levers for margin expansion, operating leverage, and improving return ratios.

 

Q1 snapshot: HDFC vs ICICI vs Axis Bank

 

ICICI Bank reported a 15.5 per cent year-on-year (Y-o-Y) increase in Q1FY26 net profit at ₹12,768 crore, beating market expectations. Its net interest income (NII) grew by 8.4 per cent Y-o-Y to ₹21,634.46 crore.

 

On the other hand, HDFC Bank, which is the largest private sector lender by market capitalisation, reported a 12.2 per cent Y-o-Y rise in standalone net profit at ₹18,155 crore, but its consolidated net profit slipped 1.31 per cent. Its NII rose 5 per cent Y-o-Y to ₹31,438 crore.

 

Both the lenders witnessed contraction in their net interest margins with ICICI Bank reporting NIM at 4.34 per cent (down 7bps quarter-on-quarter) and HDFC Bank at 3.35 per cent (down 11bps Q-o-Q).

 

ICICI Bank's gross non-performing asset (GNPA) ratio was stable sequentially, which deteriorated slightly (6bps) for HDFC Bank, suggesting lingering post-merger challenges.

 

Axis Bank, meanwhile, reported a 4 per cent Y-o-Y decline in its standalone net profit and a marginal 1 per cent growth in NII, placing its performance behind its peers for the quarter.

 

"Among the three, ICICI Bank stands out as the best performer, reporting net profit and NII growth, and an improvement in asset quality. HDFC Bank presented a mixed picture, while Axis Bank emerged as the weakest performer, citing weaker profits and a decline in asset quality," noted Anwin Aby Geroge, equity research analyst for the banking sector at Geojit Investments.

 

ICICI Bank's consistent growth and profitability make it a strong contender in the short-term. However, HDFC Bank's scale and focus on recovery post-merger present a potential opportunity for investors, especially considering its current valuation, Karthick Jonagadla, smallcase manager and founder of Quantace Research said.

 

Valuation: HDFC Bank to overtake ICICI Bank?

 

Valuation-wise, ICICI Bank trades at a valuation of 3-times price-to-book as against HDFC Bank's 2.6x P/B. Analysts expect this gap to narrow going forward provided HDFC Bank succeeds in executing its growth strategy.

 

The management of HDFC Bank expects to grow its loan book in-line with the industry H2FY26 onwards and outpace it in FY27.

 

"We expect the return ratio gap between HDFC Bank and ICICI Bank to narrow over the next couple of years as HDFC Bank unlocks several levers for margin improvement. These include a favourable shift in loan mix, repayment of high-cost borrowings, and a rising share of CASA in incremental deposits. The aggressive branch expansion undertaken during FY20–FY23 is also likely to yield returns," said Rohan Mandora of Equirus Securities.

 

That said, if ICICI Bank continues to outperform, it may maintain its premium valuation, they cautioned.