Why ICICI Bank, HDFC Bank shares saw profit booking after Q3 results

HDFC Bank and ICICI Bank Q3FY26 results draw mixed analyst reactions. Here's why ICICI Bank shares fell and why HDFC Bank faces growth concerns.

India’s biggest private sector lenders – HDFC Bank, and ICICI Bank – received mixed reactions from D-Street analysts, following the release of their respective December quarter (Q3FY26) results on Saturday. 

 

Analysts believe the extension of ICICI Bank’s current managing director (MD), Sandeep Bakhshi’s term for two years was the only positive for the lender in an otherwise in-line quarter. For HDFC Bank, they believe the results were a mixed bag with margin expansion a positive surprise, but increase in profitability, driven by higher treasury income, a negative development. 

 

On the bourses, both the shares witnessed profit booking on Monday with ICICI Bank shares declining 3.6 per cent in the intraday trade, and HDFC Bank shares dropping 1.2 per cent.

Why are ICICI Bank shares falling?

ICICI Bank’s quarterly earnings had been beating Street estimates over the past few quarters. Amid this, a largely in-line quarter with a dent on profitability due to one-time jump in provisions may have soured sentiment, believe analysts. 

 

ICICI Bank’s net profit declined 4 per cent year-on-year (Y-o-Y) and 8.4 per cent quarter-on-quarter (Q-o-Q) to ₹11,320 crore in Q3FY26, weighed by a one-time provision, worth ₹1,283 crore, set aside for Agri-related assets. 

 

Adjusted for this, the profit was in-line with Street estimates. Operationally, the lender’s net interest income (up 7.7 per cent Y-o-Y/1.9 per cent Q-o-Q) at ₹21,930 crore, and steady net interest margins (NIMs) at 4.3 per cent with also in-line with estimates.

 

Notably, ICICI Bank missed Other Income estimate amid an unexpected treasury income loss (₹160 crore).

 

That apart, ICICI Bank’s credit growth posted a relatively modest growth of 12 per cent Y-o-Y and 4 per cent Q-o-Q as Retail loan growth stayed moderate at 7.2 per cent Y-o-Y and 1.9 per cent Q-o-Q, reflecting slower expansion in home and unsecured loans, including Personal Loans/Credit cards. 

 

Deposit growth, too, was moderate at 9.2 per cent Y-o-Y/2.9 per cent Q-o-Q with CASA ratio declining 63bps to 40.2 per cent Q-o-Q. This was due to a reduction in institutional savings, which constitute around 15 per cent of the average savings pool. 

 

Going ahead, analysts at Emkay Global expect the lender to see some margin pressure in Q4FY26, impacted by the recent repo-rate cut in December and potential rate cut in February. On its part, the bank, expects to keep NIMs steady in the next quarter. The brokerage has cut ICICI Bank’s FY26 earnings estimates by around 5 per cent to factor-in the recent earnings. 

 

Over the medium-term, however, the brokerage believes ICICI Bank is well-positioned to deliver 2.2 per cent return on asset (RoA) over FY26-28E, aided by better growth, cost management, improving fees, and contained loan-loss provisions. 

 

“This, along with management credibility, asset quality, and strong capital/provision buffer, calls for premium valuations. We retain ‘Buy’ on the stock and revise our target price up to ₹1,785 from ₹1,700,” it said.

 

JM Financial Institutional Equities, Elara Capital, and Motilal Oswal Financial Services, too, raised their targets as the extension of the MD & CEO’s tenure by two years removed a major overhang over the stock and provided earnings visibility.

 

“ICICI Bank continues to merit a premium valuation, supported by its superior asset quality profile, consistent RoA/RoE delivery, strong internal capital generation and improving growth momentum across retail and business banking. The temporary spike in provisions is regulatory in nature and does not alter the bank’s long-term earnings trajectory or balance sheet strength. Besides, leadership continuity further enhances execution confidence and strategic stability,” said JM Financial, maintaining its ‘Buy’ rating and a higher target price of ₹1,725.  ALSO READ | How to trade ICICI Bank, HDFC Bank post Q3 results? Here's a trading guide

Cautious optimism for HDFC Bank

Despite a healthy set of results in Q3FY26, analysts remain skeptical on the growth outlook for HDFC Bank. 

 

India’s biggest private sector lender posted a Q3FY26 net profit of ₹18,600 crore, up 11 per cent Y-o-Y, on higher treasury income. Its NII grew 6.4 per cent Y-o-Y to ₹32,620 crore with NIMs expanding 8bps Q-o-Q to 3.35 per cent.

 

However, as the lender clocked a 12 per cent Y-o-Y loan growth and an 11.6-per cent deposit growth, its loan-to-deposit ratio (LDR) inched up to 98.7 per cent.

 

Elara Capital said HDFC Bank’s earnings presents its conundrum to manage growth vs NIM vs liquidity coverage ratio (LCR) vs LDR outcomes, which are likely to cause dislocation. 

 

Though transitioning through the tough part journey here after should be more amicable, but transition on LDR would be a challenge for HDFC Bank. “Deposits needs in FY27 may call for stickier costs, feeding into challenges as the bank tries to balance between LCR vs LDR vs growth vs NIM outcomes. Given already low credit cost, levers in opex would sustain earnings pressure in the near term,” it added. 

 

Echoing similar concerns, JM Financial said that even though the management has guided for ~85-90 per cent LDR and ~100bps higher-than-system credit growth in FY27, it will be hard to achieve  the target despite increasing maturity of newer branches. 

 

“The bank’s LCR fell to 116 per cent during the quarter (vs 120 per cent in Q2FY26 and 125 per cent for ICICI Bank), indicating the need to strengthen deposit growth and granularity to arrest further moderation. We expect loans, deposits, and EPS to grow at 13 per cent, 16 per cent, and 14 per cent CAGR, respectively, with average RoA and RoE of 1.8 per cent and 14 per cent over FY26-28,” it said. 

 

The brokerage downgraded the stock to ‘Add’ and cut the target price to ₹1,050 from ₹1,160.

 

Elara Capital, meanwhile, has upgraded the stock to ‘Buy’ (unchanged target: ₹1,147); and Emkay Global, and Motilal Oswal maintained ‘Buy’ ratings with target prices of ₹1,225 and ₹1,175, respectively.