Mumbai: Short-term investors are making a clear choice in the private banking space: ICICI Bank over HDFC Bank, as the former lender’s stronger performance in the June quarter, marked by healthy profit growth and resilient margins, puts it ahead of its rival. HDFC Bank, meanwhile, continues to grapple with post-merger challenges, including a high credit-deposit (CD) ratio, which has weighed on investor sentiment. A high credit-deposit ratio means deposits are not growing as fast as credit growth.

While both banks have the best networks in the country, ICICI has an edge at this juncture, said analysts.

“ICICI Bank is reaping the rewards of a well-executed transformation, showing clarity and consistency, while HDFC Bank navigates a transitional phase post-merger,” said Shrikant Chouhan, head, equity research, Kotak Securities. HDFC Bank shares rose a little over 2% on Monday, after its June quarter results and weekend announcements of a dividend and bonus issue. ICICI Bank shares closed nearly 3% up after it posted healthy profit growth, driven by stable net interest margins and strong asset quality. HDFC Bank’s earnings have raised concerns. With its CD ratio still in the 90s post-merger, the bank continues to face challenges in deploying incremental liquidity efficiently, weighing on near-term loan growth and NIMs.

The difference in better near-term earnings visibility is where ICICI Bank scores over HDFC, making it the preferred choice for short-term investors. “ICICI Bank seems to be a preferred pick with its robust asset quality, strong capital position and sustained profitability momentum,” said Prashanth Tapse, senior VP (research), Mehta Equities.

In the case of HDFC Bank, the stock has underperformed and would remain under pressure due to valuation de-rating and muted earnings show post-merger with HDFC, according to Tapse.

Despite the current preference for ICICI Bank, analysts are watching HDFC Bank closely. The bank has guided to beat industry growth in FY27 earnings and at least grow at par with the industry in FY26 earnings.In the short to medium term, ICICI Bank is the go-to choice for investors looking for stability. However, for long-term investments, Sunny Agrawal, head, fundamental research, SBI Research, believes that the Street will wait for clarity on the growth trajectory of HDFC Bank (growth ahead of industry) and its relative standing with reference to ICICI Bank before changing preference from the current favourite. HDFC Bank’s FY27 growth will be the key deciding factor.Tapse of Mehta Equities has a different view. “ICICI Bank appeals to short to medium term investors seeking earnings visibility, stability and strong momentum. In contrast, HDFC Bank suits long-term investors who can look beyond near-term volatility and are focused on structural growth potential post-merger.”