G.

SRINIVASA BABU

©KY PUBLICATIONS
Vol.1.Issue.3.2014

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INTERNATIONAL JOURNAL OF BUSINESS, MANAGEMENT
AND ALLIED SCIENCES (IJBMAS)
A Peer Reviewed International Research Journal

A COMPARATIVE STUDY OF FINANCIAL PERFORMANCE STABILITY OF TWO PRIVATE

COMMERCIAL BANKS (ICICI AND HDFC) AND THEIR SUBSIDIARY COMPANIES IN
INDIA

G.SRINIVASA BABU
HOD, Department of Commerce
The Hindu College, Machilipatnam

ABSTRACT
The financial statement provides rich information on the operational results
of a business unit and much can be learnt from a careful examination of
these statements. The purpose of financial statement analysis is to diagnose
the information contained in financial statements so as to judge the
profitability and financial soundness of the firm. Financial statement analysis
is the process of identifying the financial strengths and weakness of the firm
by properly establishing relationship between the items of the balance
sheet and profit and loss account and other operative data. In the current
research the author has analyzed the financial performance of ICICI Bank
and HDFC Bank along with their subsidiary companies with the help of
Article Info:
information collected from the annual records of the Banks. In order to
Received on:04/09/2014
evaluate the financial performance of the two banks, the powerful tools
Revised on:14/09/2014
namely the Ratio analysis and Index were applied. Rate of interest earned
Accepted on:27/09/2014
for both banks are more or less same. But the rate of interest paid is much
low for HDFC Bank. It is 7.12 percent in 2009 and 6.1 percent in 2013 for
ICICI Bank whereas it was 4.64 percent in 2009 and 5.62 percent in 2013 for
HDFC Bank. It shows high operational efficiency of HDFC Bank compared to
ICICI Bank. The index value of equity of ICICI Bank was 162.43 in 2013 when
compared to 2008. But it was 382.88 for HDFC Bank which shows 2.35 times
higher for the HDFC Bank than for ICICI Bank. The index value of Deposits of
ICICI Bank was only 119.83 Cr in 2013 when compared to 2009. But it is
364.77 for HDFC Bank which shows 3.04 times higher for the HDFC Bank
than for ICICI Bank. Banking sector is chosen as it is highly regulated sector
in India. HDFC bank has largest market capitalization among the banking
players which is immediately followed by State bank of India (SBI) and ICICI

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 G.SRINIVASA BABU
bank. Since SBI is largest PSU bank in India, ICICI bank and HDFC banks are
considered for comparative analysis in order to create a level playing field.
Different ratios are used in this study and particularly those which are
related to the financial statement for this purpose balance sheet of 2009-
2012 of both the banks are used and from them ratios are calculated so
according to which we can easily compare the banks performance and tell
which private banks grow faster and whose position is better than the other
one. After comparing the financial position it is clear that position of ICICI is
much better than the HDFC.

Introduction
In order to achieve its goal, every company must formulate its policy, including financial policy, more
scientifically. The survival of any organization depends upon its financial soundness. The company is deemed
to be financially sound if it runs the business effectively and efficiently by using the scarce resources. If a
company fails to utilize its resources purposefully, its long term growth will be seriously affected. Therefore, it
is highly necessary to have finance oriented policies. To assess the financial soundness of any organization,
financial statements of that organization have to be analyzed. The financial statement provides rich
information on the operational results of a business unit and much can be learnt from a careful examination of
these statements. In the words of Metcalf and Titard,” Analyzing financial statement is a process of evaluating
the relationship between component parts of a financial statement to obtain better understanding of a firm’s
position and performance”. The purpose of financial statement analysis is to diagnose the information
contained in financial statements so as to judge the profitability and financial soundness of the firm. Financial
statement analysis is the process of identifying the financial strengths and weakness of the firm by properly
establishing relationship between the items of the balance sheet and profit and loss account and other
operative data. For analyzing the financial statement of an organization, a number of financial tools are being
used. One such is ratio analysis which is considered to be the most powerful and popular tool very easily
applied for practical purposes. The result of ratio analysis is more accurate and it can be used as basis for
future decisions. Now-a-days all the organizations including banking companies have widely used this
technique to evaluate performance.
ICICI Bank is an Indian Multinational Banking and Financial Services company head quartered in
Vadodara. ICICI Bank was originally promoted in 1994 by ICICI Ltd. an Indian financial institution and was its
wholly owned subsidiary. ICICI‟s shareholding in ICICI Bank was reduced to 46 percent through a public
offering of shares in India in 1998, followed by various other offering. ICICI (The Parent Company) was formed
in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian Industry to
provide long term project financing to Indian Industry. The parent company was later merged with the bank.
The bank was initially known as the Industrial credit and investment corporation of India Bank, before it
changed its name to the abbreviated ICICI Bank. At present, it is the second largest bank in India in terms of
assets and market capitalization. In 1999, ICICI became the first Indian Company and the first bank or financial
institution from non-Japan Asia to be listed on the NYSE. In 2000, ICICI Bank became the first Indian Bank to list
on the New York stock Exchange with its five million American depository shares issue generating a demand
book 13 times the offer size. The Bank has contributed to set up of a number of Indian institutions to establish
financial infrastructure in the country over the years.
Subsidiaries:
 ICICI Prudential Life Insurance Company Ltd.
 ICICI Lombard General Insurance Company Ltd.
 ICICI Securities Ltd.
 ICICI Prudential AMC & Trust
 ICICI Venture Funds Management Company Ltd.
 ICICI Direct

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 G.SRINIVASA BABU
 ICICI Venture
 ICICI Foundation
ICICI Bank has also banking subsidiaries in UK, Canada & Russia
HDFC Bank Ltd. is an Indian banking and financial services company based in Mumbai. It was
incorporated in August 1994. HDFC Bank is the fifth largest bank in India by assets. The Bank was promoted by
the Housing Development Finance Corporation, a premier housing finance company (established in 1977) of
India. The Housing Development Finance Corporation (HDFC) was amongst the first to receive an „in principle‟
approval from the Reserve Bank of India (RBI) to set u a bank in the private sector, as part of RBI‟s
liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 and
commenced operations as a scheduled commercial bank in January 1995. HDFC Banks mission is to be a world
class Indian Bank. The bank is committed to maintain the highest level of ethical standards, professional
integrity, corporate governance and regulatory compliance. Bank’s business philosophy is based on five core
values: operational excellence, customer focus, product leadership, people and sustainability. The Bank’s
American Depository shares (ADS) are listed on the New York stock exchange (NYSE) under the symbol „HDB‟
and the Bank’s Global Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange.
Subsidiaries
HDFC Bank has two subsidiaries:
HDB Financial Services Limited (HDBFS)
HDFC Securities Ltd. (HSL)
Research Methodology
In this present study, an attempt has been made to evaluate and compare the financial performance
of ICICI and HDFC and both of these are banks related with the private sector. The study is based on secondary
data and the details are collected through websites, magazines and journals. The time period of study is four
years 2008 to 2012. Ratio analysis was applied to analyse the performance of these banks.
Review of Literature
1
N. S. Varghese (2000) is of the opinion that new generation private sector banks with their latest
technology are able to implement e-banking and are highly preferred by investors in the stock market. He also
points out that prominent new generation private sector banks like HDFC and ICICI have entered into internet
banking through which greater convenience is offered with lower transaction cost.
2
Bharathi Pathak (2003) makes a study of “The financial operations of new generation private sector
banks in India”. Five banks (Indusind bank, Centurion bank, HDFC bank, ICICI bank and UTI bank) are taken up
for financial analysis for a period of five years from 1996-97 to 2000-01. Their financial performance is studied
under four different parameters – financial, operating, profitability and productivity. His conclusion is that the
working of all banks is satisfactory but HDFC bank comes at the top closely followed by ICICI bank
3
Gilotra (2003) , in his study on retail lending, views that the success of retail lending of a bank
depends on factors like marketing efficiency, proper appraisal and follow-up. He also finds that HDFC has
become very excellent in housing finance solely due to the long term strategies adopted by them.
4
Arti (2009) in her comparative study of ICICI bank and SBI found that ICICI bank perform better in
staff behaviour and services than SBI. She also found that the competitive rate and commitment make
satisfied customers while hidden charges is the reason for dissatisfaction with ICICI bank.
5
Delvin James (1995) makes a case study of the retail banking services in UK using First Direct, a
subsidiary of Midland Bank. He concludes that banks can increase their market share through proper
communication and prompt delivery of their products.
NEED FOR THE STUDY
The financial performance of ICICI Bank and HDFC Bank has become a fascinating topic for
conversation, comment and debate. There is growing evidence of concern by the authorities on the declining
financial performance of the banking system due to unsecured loans and advances. The RBI pressures on
banks profitability and suggest various methods to reduce the unsecured loans and advances, with changes in
the social and economic objective of ICICI commercial banks particularly of State Bank of India and its
associates. It becomes extremely over and finds remedial measures to reduce the financial performance in the

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 G.SRINIVASA BABU
value of new banking philosophy. The approach of policy makers towards financial performance has changed,
with the result that low profits have become a fact of life. Therefore, it is high time to concentrate on analysis
of the financial performance of ICICI Bank and HDFC Bank.
SCOPE OF THE STUDY
The study greatly giving attention on appraising any changes that perceived and revealed in the
financial performance of ICICI Bank and HDFC Bank. Furthermore, the study attempted to identify areas so as
to improve the financial performance of ICICI Bank and HDFC Bank
Objectives of the Study
1. To study the financial performance of ICICI and HDFC.
2. To compare the financial performance of ICICI and HDFC.
3. To analyze the profitability performance of ICICI and HDFC bank on the basis of net profit
LIMITATIONS OF THE STUDY
Financial analysis is mainly done to compare the growth, profitability and financial soundness of the
respective banks by analysing the information contained in the financial statements. Financial analysis is done
to identify the financial strengths and weaknesses of the two banks by properly establishing relationship
between the items of Balance Sheet and Profit & Loss Account. It helps in better understanding of banks
financial position, growth and performance by analysing the financial statements with various tools and
evaluating the relationship between various elements of financial statements
Table 1: Key Indicators of ICICI Bank
(Rs. in millions)
Items 2007-08 2008-09 2009-10 2010-11 2011-12
Deposits (Rs.) 2444311 2183478 2020166 2256021 2555000
Advances(Rs.) 2256161 2183108 1812056 2163659 2537277
Net NPA (%) 1.55 2.09 2.12 1.11 0.73
No. of Branches 1271 1432 1719 2565 2780
No. of Employees 40686 34596 35256 26929 25253
Source: A Profile of Bank: 2011-12, RBI Report
Above Table No. 1 shows five key indicators of ICICI Bank. The deposit of ICICI Bank shows a mix trend
during the study period. It was Rs. 2444311 million during the year 2007 -08 and then afterwards decreased up
to year 2009-10, again increased and it was Rs. 2555000 million in 2011 -12.
The Advances of ICICI Bank also shows a mix trend during the study period. It was Rs. 2256161 million
in 2007 -08 and then afterwards reduced up to year 2009-10, again increased and it was Rs. 2537277 million in
2011-12.
The Net NPA Ratio of ICICI represents a mix trend during the study period. It was 1.55 percent in
2007-08 and went up to 2.12 percent in 2009 -10 and then afterwards reduced and it was 0.73 percent in 2011
-12. The number of branches continuously increased during the study period.
Numbers of branches were 1271 in 2007-08 and went up to 2780 in 2011-12. Number of employees shows a
mix trend during the study period No. of employees were 40686 in 2007 -08, Decreased in 2008-09, increased
in 2009-10 and then afterwards decreased and they were 25253 in 2011 -12.
While studying the responses of the field staff of ICICI Bank, who are involved in the actual
implementation of marketing policies such as marketing executives' direct sales associates, etc were contacted
to find out their responses. On analysis of the responses the following financial products were identified by the
researcher in the form of marketing of banking services. These products marketed by ICICI Bank marketing
staff is presented in the table 2
Table 2: Key Indicators of HDFC Bank
(Rs. in millions)
Items 2007-08 2008-09 2009-10 2010-11 2011-12
Deposits (Rs.) 1007686 1428116 1674044 2085864 2467064
Advances(Rs.) 634269 988830 1258306 1599827 1954200

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Net NPA (%) 0.47 0.63 0.31 0.19 0.18
No. of Branches 745 1422 1729 1980 2186
No. of Employees 37386 52687 51888 55752 66076
Above Table No. 3 shows five key indicators of HDFC Bank. The deposits of HDFC Bank continuously
increased during the st udy period. It was Rs. 1007686 million during the year 2007-08 and went up to Rs.
2467064 million in the year 2011-12.
The advances of HDFC Bank also continuously increased during the study period. It was Rs. 634269
million in 2007 -08 and finally went up to Rs. 1954200 million in 2011-12.
The Net NPA Ratio shows a mix trend during the study period. It was 0.47 percent in the year 2007 -
08, went up to 0.63 percent in 2008 -09 and then afterwards continuously decreased and it was 0.18 percent
in 2011 -12. The number of branches continuously increases during the study period. It was 745 during the
year 2007 -08 and finally went up to 2186 in 2011 -12. Number of employees shows a mix trend during the
study period. No. of employees were 37386 in 2007 -08, increased up to 52687 in 2008-09 then decreased in
2009-10 and again increased in next two years and final they were 66076 in 2011-12.
TABLE 3: GROWTH RATE OF BOTH BANKS NET PROFIT FROM 2006-2013
(AMOUNT IN CRORES)
HDFC ICICI
YEAR AMOUNT GROWTH RATE AMOUNT GROWTH RATE
2007-08 1,590.18 39.3 415.8 33.7
2008-09 2,244.93 41.2 375.8 -9.7
2009-10 2,948.70 31.34 402.5 7.1
2010-11 3,926.40 33.15 515.1 28
2011-12 5,167.07 31.6 646.5 25.5
2012-13 6,726.28 30.2 832.5 28.8
As average growth rate in net profit of HDFC in study period is 34% and average growth of ICICI is
19.4.Profits of both banks are increasing but average growth of HDFC is greater than ICICI.
Capital Structure
st
As on 31 March, 2012 the authorized share capital of the Bank is ` 550 crore. The paid-up capital as
on the said date is ` 469,33,76,540 (234,66,88,270 equity shares of ` 2/- each). The HDFC Group holds 23.15%
of the Bank's equity and about 17.29 % of the equity is held by the ADS / GDR Depositories (in respect of the
bank's American Depository Shares (ADS) and Global Depository Receipts (GDR) Issues). 30.68 % of the equity
is held by Foreign Institutional Investors (FIIs) and the Bank has 4,47,924 shareholders. The shares are listed on
the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited. The Bank's American
Depository Shares (ADS) are listed on the New York Stock Exchange (NYSE) under the symbol 'HDB' and the
Bank's Global Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN No
US40415F2002.
The Bank's target market ranges from large, blue-chip manufacturing companies in the Indian
corporate to small & mid-sized corporate and agri-based businesses. For these customers, the Bank provides a
wide range of commercial and transactional banking services, including working capital finance, trade services,
transactional services, cash management, etc. The bank is also a leading provider of structured solutions,
which combine cash management services with vendor and distributor finance for facilitating superior supply
chain management for its corporate customers. Based on its superior product delivery / service levels and
strong customer orientation, the Bank has made significant inroads into the banking consortia of a number of
leading Indian corporates including multinationals, companies from the domestic business houses and prime
public sector companies. It is recognised as a leading provider of cash management and transactional banking
solutions to corporate customers, mutual funds, stock exchange members and banks.
The Bank also has a wide array of retail loan products including Auto Loans, Loans against marketable
securities, Personal Loans and Loans for Two-wheelers. It is also a leading provider of Depository Participant
(DP) services for retail customers, providing customers the facility to hold their investments in electronic form.

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HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA
Electron) and issues the Master card Maestro debit card as well. The Bank launched its credit card business in
late 2001. By March 2010, the bank had a total card base (debit and credit cards) of over 14 million. The Bank
is also one of the leading players in the “merchant acquiring” business with over 90,000 Point-of-sale (POS)
terminals for debit / credit cards acceptance at merchant establishments. The Bank is well positioned as a
leader in various net based B2C opportunities including a wide range of internet banking services for Fixed
Deposits, Loans, Bill Payments, etc. It was found that there is highly significant variation in the opinion of
bankers regarding the factors influencing to provide varied range of services by the selected financial
institutions. Selected factors were given different weightages by selected financial institutions. Increasing
urbanisation was given highest weightage by ICICI bank and lowest weightage by State Bank of India and HDFC
Bank. ICICI Bank gave lowest weightage to longer life span. Double income group was given highest weightage
by ICICI Bank.
DEPOSITS
Money is placed in a banking institution for safekeeping. Bank deposits are made to deposit accounts
at a banking institution, such as savings accounts, checking accounts and money market accounts. The account
holder has the right to withdraw any deposited funds, as set forth in the terms and conditions of the account.
The "deposit" itself is a liability owed by the bank to the depositor (the person or entity that made the
deposit), and refers to this liability rather than to the actual funds that are deposited. The details of Deposits of
ICICI and HDFC Bank from 2008 to 2012 are stated in Table 4
Table 4: The details of Deposits of ICICI and HDFC Bank from 2008 to 2012
ICICI BANK HDFC BANK
Year AMOUNT ( Rs.in.Cr ) INDEX AMOUNT ( Rs.in.Cr ) INDEX
2008 276983.23 100 100631.38 100
2009 261855.75 94.53 142644.8 141.74
2010 202016.6 72.93 167297.78 166.24
2011 225602.11 81.44 208287.21 206.98
2012 255499.96 92.24 246539.58 244.99
Source: Annual Audited Balance sheet of the ICICI and HDFC Bank
Table 4 reveals that the Deposits of ICICI Bank increased from Rs.276983.23 crores to Rs. 255499.96
crores from the year 2008 to 2012. It shows an increase of the index value of 19.83 percentages. But the
deposits of HDFC Bank increased at higher rate when compared to those of ICICI Bank. They increased from
Rs.100631.38 crores to Rs. 246539.58crores from the year 2008 to 2012.It shows an increase of the index
value of 264.77 percentage. With respect to ICICI Bank the amount of deposit decreased from 2008 to 2012,
with a decrease of deposit of 8 percentages. But in HDFC Bank the deposit increased in all the years, and it
continuously increased at high rate in 2012
Analysis of the Comparative performance of ICICI Bank and HDFC Bank is done through the financial
statements for five years from 2008 to 2012. The final result of this analysis is stated in Table 5
Table 5: COMPARATIVE STATEMENT ABOUT THE FINANCIAL PERFORMANCE OF ICICI AND HDFC BANK
ICICI HDFC
S. NO Factors 2008 2012 2008 2012
1 Deposits (Rs.in crores) 276983.2 331913.7 100631.4 367080.33
2 Borrowings (Rs.in crores) 84566.05 154759.1 4478.86 49596.72
3 Advances (Rs.in crores) 240846.5 338702.7 6346.9 315418.86
4 Investment (Rs.in crores) 160046.8 177021.8 49288.01 119571.06
5 Equity 45072.23 73213.32 11535.15 44166.63
6 Debt 276983.2 486672.8 1051102.24 416677.1
7 Debt Equity Ratio 6.14 6.64 9.11 9.43
8 Return on Equity 4.06 9.38 9.6 14.1

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9 Return on Capital Employed 8.9 7.31 5.51 6.92
10 Equity Dividend (Rs.in crores) 1227.7 2656.28 301.27 1643.35
11 Earnings per share(Rs) 28 101.22 44.92 36.53
12 Book value of share (Rs) 401.93 662.49 325.45 184.1
13 Rate of return Earned 8.5 9.59 8.28 9.78
14 Rate of return Paid 7.12 6.1 4.64 5.62

The above Table 5 reveals that the Deposit of HDFC Bank was 36.37 percent more than that of ICICI
Bank during 2008. But it increased to 110.59 percent in 2012. It shows a higher growth rate of HDFC Bank to
the extent of exceeding the deposits of ICICI Bank in 2012.
The index value of Deposits of ICICI Bank was only 119.83 in 2012 when compared to 2008. But it is
364.77 for HDFC Bank which shows 3.04 times higher for the HDFC Bank than for ICICI Bank.
Borrowing of HDFC Bank was 5.29 percent more than that of ICICI Bank during 2008. But it increased
to 32.04 percent in 2012. It shows a remarkable growth rate of HDFC Bank.
The index value of Borrowings of ICICI Bank was only 183 in 2012 when compared to 2008. But it was
1107.07 for HDFC Bank which shows 6.05 times higher for the HDFC Bank than for ICICI Bank.
Advance of HDFC Bank was 26.33 percent more than that of ICICI Bank during 2008. But it increased
to 93.12 percent in 2012. It shows a high growth rate of HDFC Bank as for as advances are concerned.
The index value of advances of ICICI Bank was only 140.06 in 2012 when compared to that of 2008.
But it was 497.29 for HDFC Bank which shows 3.55 times higher for the HDFC Bank than for ICICI Bank.
Investment of HDFC Bank was 30.79 percent more than that of ICICI Bank during 2008. But it
increased to 67.54 percent in 2012. It shows a high growth rate of HDFC Bank as for as investments are
concerned.
The index value of investments of ICICI Bank was only 110.6 in 2012 when compared to 2008. But it
was 242.59 for HDFC Bank which shows 2.19 times higher for the HDFC Bank than for ICICI Bank.
Equity for HDFC Bank was 25.59 percent higher than that of ICICI Bank during 2008. But it increased to
60.32 percent in 2012.
The index value of equity of ICICI Bank was 162.43 in 2012 when compared to 2008. But it was 382.88
for HDFC Bank which shows 2.35 times higher for the HDFC Bank than for ICICI Bank.
Debt of HDFC Bank was 37.94 percent higher than of ICICI Bank during 2008. But it increased to 85.61
percent in 2012. It shows a high growth rate of HDFC Bank as for as debt is concerned.
The index value of debt of ICICI Bank was only 175.7 in 2012 when compared to 2008. But it was
396.41 for HDFC Bank which shows 2.25 times higher for the HDFC Bank than for ICICI Bank.
Debt Equity ratio slightly increased from 6.14 to 6.64 and 9.11 to 9.43 from 2008 to 2012 for ICICI
Bank and HDFC Bank respectively. HDFC Bank recorded high Debt Equity ratio than ICICI Bank. It shows that
HDFC Bank more percentage of debt than equity when compared to ICICI Bank.
Return on Equity is comparatively high for HDFC Bank. It increased from 9.6 percent to 14.1 percent
whereas it increased from 4.06 percent to 9.38 percent for ICICI Bank from 2008 to 2012.
Equity dividend is comparatively low for HDFC Bank. Its share when compared to that of ICICI Bank
was 24.53 percent in2008.But it increased to 61.86 in 2012. It is evident from the index value which is 216.36
for ICICI Bank and445.47 for HDFC Bank. It shows 2.05 times higher for the HDFC Bank than ICICI Bank.
Earning per Share shows a decreasing trend for HDFC Bank. It decreased from Rs.44.92 in 2008 to
Rs.36.53 in 2012 whereas it increased for ICICI Bank from Rs.28 in 2008 to Rs.101.22 in 2012.It is evident from
the index value which is 361.6 for ICICI Bank and 118.12 for HDFC Bank. It shows 0.32 times for the HDFC Bank
than ICICI Bank.
Book value per Share also shows a decreasing trend for HDFC Bank. It decreased from Rs.325.45 in
2008 to Rs.184.1 in 2012 whereas it increased for ICICI Bank from Rs.401.93 in 2008 to Rs.662.49 in 2012. It is
evident from the index value which is 164.82 for ICICI Bank and 56.56 for HDFC Bank. It shows 0.34 times for
the HDFC Bank than ICICI Bank.

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Rate of interest earned for both banks are more or less same. But the rate of interest paid is much
low for HDFC Bank. It is 7.12 percent in 2008 and6.1 percent in 2012 for ICICI Bank whereas it was 4.64 percent
in 2008 and 5.62 percent in 2012 for HDFC Bank. It shows high operational efficiency of HDFC Bank compared
to ICICI Bank.
With most of the key subsidiaries listed now, comparison between ICICI Bank and HDFC group shares
deserves attention or seems to be well-timed. HDFC and HDFC Bank have been definitely and consistently
superior than ICICI Bank in terms of important financial metrics. Accordingly, their shares have significantly
outperformed ICICI Bank with market capitalisation jumping more than five and 12 times, respectively, in the
last one decade, compared to the latter’s three times, according to Capitaline data.
Even HDFC’s newly-listed subsidiary, HDFC Standard Life Insurance, has done better than ICICI
Prudential Life Insurance though listing dates are different. The stock of ICICI Prudential Life Insurance has
gained close to 42 % in almost two years of listing, while HDFC Standard Life is up 44 % in just eight months.
According to analysts, premium valuations of HDFC group’s shares are indeed justified but currently
they are fairly valued and most offer limited upside.
On the other hand, ICICI Bank and its subsidiaries, which have underperformed HDFC group due to a
variety of reasons, can be considered as value buy, they added.
“While the company (HDFC) is tracking steady core performance, its valuation at 3.1 times adjusted
book value for core return on equity of 16.5 % appears to be fair,” said Kunal Shah, analyst at Edelweiss. He
expects 9 % upside from current levels.
HDFC Securities has a similar view and added: “Despite building in relatively lower recoveries and
cutting earnings by 31 %, ICICI Bank can yield return on average assets of 1.11 % in FY12. This, and inexpensive
valuations, drive our positive view. Further dilution in subsidiaries and robust recoveries could push earnings
upwards.”
Insurance segment: Between the life insurance subsidiaries, analysts are more bullish on ICICI
Prudential Life insurance in the near term as they expect 21 % upside versus HDFC Standard Life’s 2 %. This is
mainly due to time correction in the HDFC Standard Life stock thanks to its high valuation following robust
listing and post-listing performance.
Also, though HDFC Standard Life is estimated to report higher growth in new business APE
(annualised premium equivalent) and VNB (value of new business) over FY18-FY20, Motilal Oswal expects
improvement in VNB margin for ICICI Prudential Life Insurance from the current 17.5 %, and the same to be
sustained at 24 % in case of HDFC Standard Life.
HDFC Asset Management Company’s initial public offer got subscribed a whopping 83 times thanks to
robust financial performance and superior brand image/market position. Even though the listing performance
will be robust thanks to huge response from investors, it might again see a time correction later on as
happened in HDFC Standard Life Insurance. At the upper end of the price band, it is already valued higher at 32
times FY12 earnings/7.8 % to FY12 AUM, compared to 26 times/5.6 % in case of Reliance Nippon Life AMC.
Conclusions
The current study and discussions thereon, certainly reveals that financial performance of ICICI Bank
and HDFC Bank. Based on the study HDFC Bank financial performance is better than ICICI Bank. But in many
cases, the financial performance of ICICI Bank and HDFC Bank are good. After analysing the above ratio it is
clear that position of ICICI is better in comparison to HDFC. As we saw in the above tables and graphs that in
current ratio, quick ratio ,credit deposit ratio and Cash deposit ratio the ICICI bank performance is better and
in case of earning per share the ICICI bank increasing continuously while HDFC bank earnings per share goes
down in the last year. The average growth rate of total income is higher in HDFC bank then that of ICICI bank.
The average growth rate is 34% in HDFC and 16.6% in ICICI bank. The average growth rate of total expenditure
in HDFC bank is 25.2% which is higher than the ICICI bank which is 16.42%. The average growth rate of net
profit is higher in HDFC bank than that of ICICI bank. The average growth rate of net profit is 34% in HDFC bank
and 19.4% in ICICI bank. Hence it is concluded that the total performance and efficiency of HDFC bank is better
than that of ICICI bank.

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 G.SRINIVASA BABU
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3 Gilotra, A. (2003). Retail Banking: Lending. IBA Bulletin, 25 (11), 22-25.
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5 Devlin, James F. (1995). Technology and Innovation in Retail Banking Distribution. The International
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