ICICI Bank, HDFC Bank help Nifty Bank climb above 49,200: Which bank stock should you invest in?

Banking stocks like ICICI Bank, SBI, HDFC Bank were trading with gains of up to 3% on Tuesday, taking the Nifty Bank index higher by 2% to cross 49,000-mark for the first time in two weeks.ICICI Bank shares were among the top gainers on the Nifty Bank index, climbing nearly 3% to hit a day’s high of ₹1,306.90. Heavyweight banking stock HDFC Bank also rose over 1% to ₹1,737.40, as a major contributor to the Nifty Bank’s rally, after ICICI Bank.
The uptick follows buying action in shares of Bajaj Finserv and Bajaj Finance, and a gains in IndusInd Bank shares after the Reserve Bank of India’s comment that the private lender is well-capitalised.
Global brokerage firm Bernstein has conducted an in-depth analysis, comparing HDFC Bank and ICICI Bank, two of India’s leading private-sector lenders.
According to Bernstein, HDFC Bank, despite having nearly twice the asset base of ICICI Bank, lags behind in terms of profitability.While both banks show similar deposit growth, HDFC Bank is currently on a slower loan growth trajectory, compared to ICICI Bank.

In terms of valuation, both banks have comparable price-to-earnings (P/E) multiples. However, when measured on a price-to-book (P/B) ratio, ICICI Bank trades at a premium of approximately 3 times its book value, compared to HDFC Bank’s 2.6 times.

Despite this, Bernstein favours HDFC Bank over ICICI Bank, as it expects profitability improvements to outweigh the impact of slower growth in the long run.

Out of the 48 analysts that track HDFC Bank, 42 of them have a ‘Buy’ rating on the stock, while six of them say ‘Hold’. On the other hand, out of the 51 analysts that have coverage on ICICI Bank, 48 of them have a ‘Buy’ rating, while three analysts have a ‘Hold’ recommendation.

Shares of HDFC Bank Ltd. are currently trading 1.18% higher at ₹1,730.55, while ICICI Bank stock is up 3.38% at ₹1,311.85.