This means that ICICI Bank has displaced HDFC Bank as being the most widely owned stock by mutual fund managers for several years.
As on July 30, the value of mutual funds’ holding in ICICI Bank stood at Rs 99,541.2 crore; it was Rs 91,854.6 crore in HDFC Bank. ICICI Bank has also decisively moved ahead of HDFC Bank in terms of percentage of equity assets under management.
Mutual funds’ holding in ICICI Bank now accounted for 5.75 per cent of their equity AUM. By comparison, HDFC Bank now accounts for 5.31 per cent of equity AUM of mutual funds, data compiled by Prime Database showed.
The change of guard is another sign of the tilting of the scale of fortune in favour of ICICI Bank against HDFC Bank’s dominant reign of close to a decade.
Shares of ICICI Bank have dominated HDFC Bank when it comes to returns on the one-year and five-year time horizon. ICICI Bank’s stock has risen 87 per cent in the past year and 199 per cent in the past five years. Compared to that, HDFC Bank’s shares have risen 44 per cent in the past year and 144 per cent in the previous five years.
Much of the gains in ICICI Bank over the past three years have been due to the clean up done by Chief Executive Officer Sanjay Bakshi since his appointment in October 2018. Bakshi has ensured that the bank cleaned up its act on the loan book and on corporate governance, and refocused the bank’s energy on becoming the growth machine it was in the 2000s.
In the time since Bakshi’s appointment, ICICI Bank has seen a marked improvement in earnings thanks to an improving asset quality profile as well as net interest margin. Given the pace of improvement, ICICI Bank could well match the best-in-class margins of HDFC Bank.
Naveen Kulkarni, chief investment officer at Axis Securities, said: “I will bet on ICICI Bank over HDFC Bank right now as growth is better for ICICI Bank at this moment, and it also boasts of a stronger corporate loan book. But the most crucial thing is that ICICI Bank is currently technologically superior to HDFC Bank.”
In the quarter ended June, ICICI Bank reported a NIM of 3.89 per cent against the 4.1 per cent registered by HDFC Bank.
“Growth leadership, strong digital push, focus on risk adjusted returns at an operating level and best-in-class coverage should lead to a re-rating of the bank,” Edelweiss Securities said in a recent note.
In 2021, the gains in the stock were driven by other factors such as investors’ optimism that corporate credit demand will return soon. Fund managers and investors are betting on a revival in private capital investment in the country. The argument is that the strong return of demand in the economy after the pandemic and deleveraging of balance sheets by companies in the past year should provide a platform for capacity enhancement.
So far, there hasn’t been enough evidence to conclude corporate investment is rising. This is because credit impulse in the economy is lackluster and capacity utilisation is still miles away from the point where companies can start pondering over expansion.
