SBI vs. ICICI Bank: Which is the Better Bank? - Views on News from Equitymaster

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SBI vs. ICICI Bank: Which is the Better Bank?

Dec 31, 2010

Comparison of behemoths in any sector brings with it the risk of overlooking some competitive advantages. For instance, take a look at the biggest banking entities in India. Comparing SBI with ICICI Bank could be at the risk of ignoring their inherent traits. SBI being the government's de-facto banker has the upper hand in collecting taxes or public investments (PPF). ICICI Bank on the other hand makes the best use of its private (largely foreign) ownership and international presence. But having said that, each of the entities have been the biggest beneficiaries of India's economic growth. Nevertheless, they chose separate ways to cash in on the same.

The Fight for Market Share

Source: Equitymaster

SBI has had more than a century's presence in India's banking sector. This can be one an important reason for the lion's share that SBI has in the sector. But given the scale of fragmentation in Indian banking, credit must be given to SBI's ability to retain the share. Broadly, over the last decade, SBI has commanded double the share of the second largest player in the sector. ICICI Bank on the other hand, has been the pioneer of retail banking in India. Building on its rapid growth in the space, the private sector behemoth acquired the highest share of retail assets by FY07. But the economic crisis that unfolded thereafter forced it to sacrifice market share for quality of assets.

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Margins: Then and Now

Source: Equitymaster

The difference in the business models of SBI and ICICI Bank is evident from the pattern of their respective net interest margins (NIMs). SBI has maintained NIMs in excess of 2.6% over the past decade. On the contrary, that of ICICI has crossed 2.5% just once in the past 8 years. What this means is that the former has concentrated on high margin business. Or rather on sustained margins despite larger volume of lending. ICICI on the other hand resorted to low margin lending to grow balance sheet size. As also failed to accumulate a large low cost deposit base like SBI. Nevertheless, the gap in margins has narrowed in FY10. This was equally due to the fallout of SBI's affinity to teaser loans. As also ICICI Bank's focus on low cost deposits (CASA). Ability to re-price loans has also had an impact on the margins.

Recognition of Quality

*ICICI Bank's net NPAs shot up in FY03 due to merger with ICICI Ltd.

Neither SBI nor ICICI Bank has a stellar record when it comes to asset quality. Their smaller PSU and private sector peers have beaten them hands down in retention of asset quality. Nevertheless between the two, SBI has been more cautions in terms of quality of lending. Most of SBI's asset slippages have been due to government induced lending to priority sectors. Or they have borne the brunt of restructured assets. ICICI Bank's on the other hand has been bad primarily due to its voluntary effort to lend for poor quality of assets. Having said that, over the past two years, ICICI Bank has stepped up both its focus on quality as well as its provisioning efforts.

Returns to Shareholders

Source: Equitymaster

SBI wins hands down when it comes to the returns that the banks have generated for shareholders. Both higher market share and better margins have played a role in this. But more importantly, SBI has never resorted to investments in high risk speculative instruments. And instead focused on its strengths of large franchise and low cost deposit base. ICICI Bank's frequent equity dilution has also impacted its return on equity.

Which is the Better Bank?

As we said earlier, SBI's government backing makes it the more 'safer' entity. ICICI Bank by itself does not have the reputation of good quality assets. But it is certainly striving to achieve the same. Both in terms of margins and returns, SBI has had an edge and will continue to have it in the medium term. Having said that investors must carefully weigh the future prospects of both the entities vis-a-vis their respective valuations before taking their pick.

Latest Update on SBI and ICICI Bank

In the years since this piece was posted, both SBI and ICICI Bank have grown multifold in terms of business and financials.

SBI's share price hasn't seen much improvement and has grown at a -4% Compound Annual Growth Rate (CAGR) over the past ten years. ICICI Bank's share price on the other hand has grown at a CAGR of 6.9% over the same period.

SBI is the oldest and largest commercial bank in India. Having straddled across scores of economic cycles, SBI is a seasoned player in every sort of crisis. And apart from its role as the government's de facto banker, SBI has taken measures to bridge gap with private sector banks.

The government-controlled bank operates one of the world's largest branch network, with more than 13,500 branch offices throughout India.

Average return on equity (ROE) for the bank stands at 8.3% over the past 10 years.

It now stands at a market cap of about Rs 1,820,620 million.

You can see SBI company fact sheet here.

On the other hand, ICICI Bank is one of the leading private sector banks in India. The bank's consolidated total assets stood at Rs 13.77 trillion at March 31, 2020. The private lender currently has a network of 5,324 branches and 15,688 ATMs across India. ICICI Bank is the first Indian Bank to list on New York Stock Exchange.

Average return on equity (ROE) for the private lender stands at 12.1% over the past 10 years.

It stands at a market cap of about Rs 2,592,140 million.

You can see the ICICI Bank company fact sheet here.

How the Valuations Changed Over the Years?

For the purpose of our analysis we compare the average P/E, P/BV and EV/EBITDA multiples as on March 2020 financials.

Valuation Ratios EV/EBITDA P/E P/BV
SBI 6.8x 8.9x 0.8x
ICICI Bank 12.6x 22x 1.8x
Data Source: Ace Equity

Keep a track of the latest valuations for both the companies here and here respectively.

You can see a comparison between both the companies' latest financials here.

Do check out the current share price of SBI and share price of ICICI Bank.

You can also see the latest share price of banks here.

Equitymaster requests your view! Post a comment on "SBI vs. ICICI Bank: Which is the Better Bank?". Click here!

15 Responses to "SBI vs. ICICI Bank: Which is the Better Bank?"


Feb 23, 2014

SBI has lots of features which are missing in case of ICICI. In ICICI you can't even generate meaning full statement online(It does not contain your name, address and a/c type). Even statement generated from ICICI branch does not mention a/c type. Moreover you can't set a monthly option of online transfer in case of ICICI. Here is a complete comparison of features provided by ICICI PPF vs SBI PPF: www.

Like (6)


Apr 29, 2013

I'm working in US at South
Carolina. I want to open
NRI account, usually
preferred SBI. It took me
too much time to open
account and operated in two
days. So I went to ICICI
they opened it in 20
minutes and was operated
from the next day. As per
the service for educated
ICICI was best. Easy net
banking also.

Like (3)

shashi kumar

May 20, 2012

which bank beater in india icici or sbi not important of goverment and private

Like (1)

R Sai Srinivas

Apr 1, 2012

The best bank in India is the CITY UNION BANK. They charge very less for both SB and Current a/c holders and offer abundant service and courtesy.

Like (1)


Jan 23, 2011

ICICI boasts of better reach to customer however when customer tries to contact through the given contact no. either the no.have changed or nobody is there to respond.(Eg. I have SIP for ICIci prU LIFE POLICY i TRIED TO CONTACT THEIR OFFICES AT aHMEDABAD THROUGH bRANCH lOCATOR.i DREW BLANK.

Like (3)

Sanjeev Pandiya

Jan 16, 2011

Besides things like customer service and the quality and cost of deposits, is the attitude to high risk lending, i.e. real estate, retail, etc. In this, ICICI has traditionally lagged SBI, but that is already reflected in current stock prices.
What one can play on, is a definite improvement in asset quality at ICICI, with a focus on improving their CASA. So even if ICICI comes out poorly just now, all this could change in the years to come. Relatively speaking, ICICI investors might do better than SBI investors.

Like (3)


Jan 13, 2011

As an Investor I would go with SBI then ICICI. Looking at the strength of the Balance sheet. ICICI doesn't have such Balance sheet like ICICI. Also in terms of Service ICICI bank or SBI are same due large customer base due attention is not been given

Like (1)


Jan 13, 2011

I will take ICICI bank anyday, SBI is never for retail customers, i experienced international type of service in ICICI first now other banks also provide but not so good as ICICI i will go to ICICI any day if i am given a choice of any Indian bank

Like (3)

Suresh Rao

Jan 10, 2011

Its interesting to note that most of the views on this posting is based on being a direct receipient of the service rather than as an investor. For an investor, one needs to set aside the experience and look at wether the investment is making money you are expecting. Just because you had a bad experience with the bank, did the stock fall? Pause before response, and one will have the best comment to make.

Like (1)


Jan 4, 2011

No doubt this is about customer service but strengthwise which is superior. But as an ufortunate customer of ICICI many times I have not been able to draw due to empty machines. The bank has over grown customer base wise but is yet to improve the infrastructure (be it attending a customer or sending statements in time or any other feature). All the branches in
chennai are overcroeded with 50% of the customers always not finding a place to sit. The writing desks for filling challans, provision of pins etc. have never got their due attention. Even if u go to their website and click Contact, a window to type your grievence will open. But when u send, it will not go further. Such a tactically designed system to ensure that customers do not have an arena to represent.

Like (1)
Equitymaster requests your view! Post a comment on "SBI vs. ICICI Bank: Which is the Better Bank?". Click here!

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