Best Banking Stock: ICICI Bank vs SBI

The Indian banking industry has undergone significant transformation in recent years.

Public sector banks (PSBs) which used to have dominance in the industry have slowly been overtaken by private sector peers which have gained traction due to their innovative service offerings, and their ability to serve diverse customer needs.

However, PSBs continue to hold a major market share and are witnessing significant growth in banking transactions.

Several factors including economic expansion, rising disposable income, and technological advancements are helping the growth of the overall banking industry in India.

In this ever-growing industry, two of the major players are SBI, the public sector banking giant, and ICICI Bank, the second largest private sector bank.

Let's compare the two banks using various parameters to see who is leading the race.

Business Overview

# ICICI Bank

ICICI Bank is India's second-largest private sector bank.

It offers diversified financial services to retail SME and corporate customers through its extensive product portfolio.

The bank has a network of over 6,371 branches and 17.037 ATMs across India.

Apart from a strong domestic presence, it has an international presence with branches in SA, Singapore, Bahrain, Hong Kong, Dubai, South Africa and China.

# SBI

State Bank of India (SBI) is a Fortune 500 company and one of the largest public sector banks in India.

It is also India's oldest bank, having a history of over 200 years.

SBI has around 22% market share in deposits and 19% market share in advances, with a strong customer base of over 450 million (m).

It operates over 22,219 branches, 62,617 ATMs, and 71,968 business correspondent outlets across India.

The bank also operates a network of 233 branches internationally across 32 countries including USA, Canada, Brazil, Russia, Germany, France, Australia, and Sri Lanka.

Particulars	ICICI Bank	SBI
Market Cap (in Rs billion)*	9,208.70	7,163.30

Source: Equitymaster| * as of 27th September 2024

Between the two companies, ICICI Bank has a higher market cap of Rs 9,208.7 billion (bn) compared to SBI, which has a market cap of Rs 7,163.3 bn.

ICICI Bank is also leading in terms of stock market performance. In the last one year, the share price of ICICI Bank grew at 35% as against 31% of SBI.

# Net Interest Income (NII)

Interest is a major income and expense for a bank. It collects interest when it gives out loans and pays interest when it accepts deposits.

The difference between the two is the net interest income. A positive and growing net interest income is a sign of a bank's financial health.

In the last five years, the net interest income of ICICI Bank and SBI have grown at a compound annual growth rate (CAGR) of 16.3% and 10.5%, respectively.

The five-year average net interest margin also stood at 53.7% and 43.4%, respectively.

Despite having higher interest income, SBI is second in terms of interest income growth and net interest margin after ICICI Bank.

Strong growth in advances due to expansion in retail branch network have helped both the banks grow their net interest income.

Interest income

Interest income (Rs m)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	5-Year CAGR
ICICI Bank	8,48,358	8,91,627	9,54,069	12,10,668	15,95,159	13.50%
SBI	26,98,517	27,81,155	28,99,727	35,08,446	43,91,885	10.20%
Interest expense (Rs m)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	5-Year CAGR
ICICI Bank	4,46,655	4,26,591	4,11,667	5,05,434	7,41,082	10.70%
SBI	16,11,238	15,60,102	15,61,943	18,99,808	25,97,360	10.00%
Net interest income (Rs m)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	5-Year CAGR
ICICI Bank	4,01,703	4,65,036	5,42,402	7,05,234	8,54,078	16.30%
SBI	10,87,279	12,21,053	13,37,783	16,08,638	17,94,525	10.50%
Net interest margin (%)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
ICICI Bank	47.40%	52.20%	56.90%	58.30%	53.50%
SBI	40.30%	43.90%	46.10%	45.90%	40.90%

Data Source: Equitymaster

# Profitability

To assess the profitability, it is important to look at net profit and net profit margin.

In the last five years, the net profit of ICICI Bank and SBI has grown at a CAGR of 35.8% and 27.7% respectively.

Growing loan books, rising advance yields, and an increase in net interest income have helped SBI grow its profits at a healthy rate.

For ICICI Bank, lower operating costs on account of digitisation and rising yields have led to strong profit growth.

Profitability

PAT (in Rs m)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	5-Year CAGR
ICICI Bank	8,48,358	8,91,627	9,54,069	12,10,668	15,95,159	13.50%
SBI	26,98,517	27,81,155	28,99,727	35,08,446	43,91,885	10.20%
Interest expense (Rs m)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	5-Year CAGR
ICICI Bank	4,46,655	4,26,591	4,11,667	5,05,434	7,41,082	10.70%
SBI	16,11,238	15,60,102	15,61,943	18,99,808	25,97,360	10.00%
Net interest income (Rs m)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	5-Year CAGR
ICICI Bank	95,663	1,83,843	2,51,101	3,40,366	4,42,564	35.80%
SBI	1,97,678	2,24,055	3,53,739	5,56,482	6,70,847	27.70%
Net Profit Margin	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
ICICI Bank	11.30%	20.60%	26.30%	28.10%	27.70%
SBI	7.30%	8.10%	12.20%	15.90%	15.30%

Data Source: Equitymaster

# Deposits

Deposits reflect customer confidence. Growing deposits are considered a good sign.

In the last five years the deposits of ICICI Bank grew by a CAGR of 12.9% on account of strong growth in term deposits.

For SBI, the deposits grew at a CAGR of 8.7%, primarily due to growth in current and savings account deposits.

Among the two, ICICI Bank is the leading in terms of deposit growth.

Deposits

Deposit (in Rs m )	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	5-Year CAGR
ICICI Bank	77,09,690	93,25,220	1,06,45,720	1,18,08,410	1,41,28,250	12.90%
SBI	3,24,16,210	3,68,12,770	4,05,15,340	4,42,37,780	4,91,60,770	8.70%
Deposit Growth (%)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
ICICI Bank		21.00%	14.20%	10.90%	19.60%
SBI		13.60%	10.10%	9.20%	11.10%

Data Source: Equitymaster

# Advances

Advances are the loans that a bank gives to its customers. It is important to monitor the growth of advances as it is the primary source of income for banks.

In the last five years, the advances of ICICI Bank have grown at a CAGR of 12.3%, driven by retail, business banking and rural loans.

For SBI, the advances grew at a CAGR of 9.8% on account of higher share of SME advances, personal loans, and Xpress credit loans.

Clearly, ICICI Bank has outpaced SBI in terms of advanced growth. It also has a higher advance-to-deposit ratio than SBI.

In the last five years, the average advance-to-deposit ratio of ICICI Bank and SBI stands at 88.8% and 72.2%, respectively.

Advances

Advances (in Rs m )	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	5-Year CAGR
ICICI Bank	70,62,461	79,18,014	92,03,081	1,08,38,663	1,26,07,762	12.30%
SBI	2,37,43,112	2,50,05,990	2,79,40,760	3,26,79,021	3,78,42,727	9.80%
Advances Growth (%)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
ICICI Bank		12.10%	16.20%	17.80%	16.30%
SBI		5.30%	11.70%	17.00%	15.80%

Data Source: Equitymaster

# Net NPA

A bank designates an asset as a non-performing asset (NPA) if it has not generated interest for over 90 days.

An increase in NPAs can raise concerns, impacting the bank's profitability.

To assess the extent of NPAs on a bank's balance sheet, we examine net NPAs, which represent non-performing assets as a percentage of total loans. A lower percentage indicates a healthier loan book for the bank.

The average net NPA for ICICI Bank and SBI is 0.9% and 0.1% respectively. According to the Reserve Bank of India (RBI) the net NPAs should be lower than 6%.

Both ICICI Bank and SBI have done better than the standard set by RBI. Moreover, the NPAs are falling in the last five years which is good. It indicates both the banks have superior asset quality and have been following stringent due diligence process before giving out loans.

Net NPA

Net NPA (%)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
ICICI Bank	1.40%	1.20%	0.80%	0.50%	0.40%
SBI	0.20%	0.10%	0.10%	0.10%	0.10%

Data Source: Equitymaster

# Financial Efficiency

To measure how efficiently a bank is running its business, we must look at its capital adequacy ratio and return on equity (RoE).

Capital adequacy ratio is the measure of capital a bank has against its risk-weighted credit exposures. As per the Basel III norms, the capital adequacy ratio should be a minimum of 12% to ensure the bank doesn't face insolvency issues.

RoE, on the other hand, measures the return a company generates for its equity shareholders. A high RoE is considered good.

ICICI Bank and SBI have an average capital adequacy ratio of 17.8% and 14%, respectively, indicating that both have enough capital as reserves.

The RoE of the banks has been increasing over the last few years, but ICICI Bank is slightly ahead of SBI with an average RoE of 13.3% as against 11.9% of SBI.

Financial Efficiency

Capital Adequacy Ratio	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
ICICI Bank	16.10%	19.10%	19.20%	18.30%	16.30%
SBI	13.10%	13.80%	13.90%	14.70%	14.30%
ROE	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
ICICI Bank	7.80%	11.70%	13.80%	15.90%	17.40%
SBI	7.90%	8.10%	11.60%	15.50%	16.20%

Data Source: Equitymaster

# Dividend

The dividend yield and dividend payout ratio for ICICI Bank has averaged 0.6% and 10.7%, respectively, whereas for SBI, the ratios averaged 1.3% and 14%, respectively.

While both banks do not pay high dividends, SBI is ahead of ICICI Bank.

Dividend

Dividend Per Share (Rs)	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24	3-Year CAGR
ICICI Bank	0	2	4.9	7.9	10	26.50%
SBI	0	4	7.1	11.3	13.7	24.50%
Dividend Yield	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
ICICI Bank	0.00%	0.30%	0.70%	0.90%	0.90%
SBI	0.00%	1.10%	1.40%	2.20%	1.80%
Dividend Payout Ratio	Mar-20	Mar-21	Mar-22	Mar-23	Mar-24
ICICI Bank	0.00%	7.50%	13.80%	16.40%	15.90%
SBI	0.00%	15.90%	17.90%	18.10%	18.20%

Data Source: Equitymaster

# Valuations

The two important valuation ratios are the price-to-earnings (PE) ratio and the price-to-book value (PB) ratio. They help by analysing whether a company is undervalued or overvalued.

A company is undervalued if its PE and PB are lower than its peers and overvalued if its PE and PB are higher than its peers.

The PE and PB of ICICI Bank are 19.7x and 3.5x, respectively, whereas, for SBI, the ratio is 10.4x and 1.7x, respectively.

In terms of PE and PB, the shares of SBI are undervalued when compared to ICICI Bank.

Valuation	ICICI Bank	3-Year Average	SBI	3-Year Average
P/E (x)	19.7	19.6	10.4	10.4
P/B (x)	3.5	2.9	1.7	1.4

Source: Equitymaster

Which Bank Stock is Better: ICICI or SBI?

ICICI Bank, being the second largest private sector bank in India, is actively pursuing growth initiatives to strengthen its position and expand its market share.

SBI, on the other hand, has higher interest income, deposit and advances base than ICICI Bank. It also has lower NPAs and pays higher dividend.

SBI, being the largest public sector bank, has an extensive presence across India and in 32 countries.

It is undergoing digital transformation for seamless customer experience. It has already introduced YONO and digital payments, and is now leveraging artificial intelligence and machine learning to improve customer service, fraud detection, and risk management.

Apart from this, the bank is expanding its product offerings, focusing on emerging sectors, and expanding its global footprint.

ICICI Bank, being the largest private sector bank in India, is actively pursuing growth initiatives to strengthen its position and expand its market share.

It is already at the forefront of digital transformation and plans to continue to invest in technology to improve customer experience.

The bank is now focusing on strengthening its retail banking and expand internationally. It is also on lookout for opportunities to grow inorganically.

Given India's robust economic growth, the demand for banking services is going to increase. To add to this, government initiatives to promote financial inclusion are also increasing the demand for banking services.

As ICICI Bank and SBI are well established bank and are the primary beneficiaries of this increased demand for banking.

However, it is important to note that banking is a highly regulated industry, and there is always a risk of regulatory restrictions for these companies.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here.