INTRODUCTION

This survey is not mainly concerned with discrimination between ICICI and HDFC bank, but it mainly
deals with the comparison of both banks.

Who's the banking king? ICICI or HDFC?

Even their offices reflect their attitudes. ICICI Bank's headquarters in suburban Mumbai [is a huge, imposing edifice
in glass and granite. HDFC Bank's office in central Mumbai is comparatively smaller and more sedately furnished.

The two banks have carried forward their style statement in their approach to business. ICICI Bank thinks big, is all
for growth and hungry for market share.

HDFC Bank is more conservative and cautious, grows at a measured pace, without taking any undue risks.

ICICI Bank began its retail banking venture in mid-1999. By January 2000, it had moved on to introducing home
loans, car loans, personal loans and credit cards. The merger of the erstwhile financial institution ICICI Limited with
the bank in April 2002 gave it a ready-made corporate clientele. The flip side was that ICICI Bank had Rs 10,000
crore (Rs 100 billion) of restructured assets for which it had to make provisions.

On the other hand, HDFC Bank kick started its operations in 1995 with a focus on corporate banking, targeting the
top-end of the market. Reminisces Paresh Sukthankar, head, credit and market risk, HDFC Bank, "Although the
asset yields may have been lower, we were able to cross-sell products so that the overall returns were better. We
may have grown slower than our peers, but the risks were lower."

A banking consultant observes that ICICI Bank is far more aggressive. Though ICICI executives do not admit it,
industry sources observe that ICICI's pricing has been far more competitive, which probably brought it more
customers.

COMPARISONS B/W ICICI and HDFC:

CALLING CUSTOMER: Both players targeted the same customer -- the upper-middle class. The marketing channels
used by both, including direct sales agents (DSAs), were the same.

Yet, there was a difference. While ICICI settled for nothing less than film star Amitabh Bachchan as an ambassador,
HDFC Bank chose to rely on the trusted lineage of its housing finance parent, Housing Development Finance
Corporation (HDFC).

Says Sukthankar, "While HDFC was no doubt a great brand, it was a single-product brand. Hence, it was a challenge
to make it work with other products."

In the past two years, the bank has spent less than Rs 100 crore (Rs 1 billion) on advertising and publicity (In
comparison, ICICI has spent Rs 185 crore).
HDFC Bank says that it spends have always focused on other channels such as direct sales and phone banking
rather than mainstream advertising. Explains Neeraj Swaroop, country head, retail banking, "It made sense to get the
direct communication right rather than focus on the masses. Meeting the customer face-to-face is important."

Is the brand visible enough? Swaroop acknowledges that the ICICI brand does have greater visibility, though he says
that HDFC Bank is well-known even in smaller towns.

However, he does admit the need to push the brand and HDFC Bank will unveil a new campaign next month. True to
its style, however, the spend on publicity this year will be upped by just 25-30 per cent.

Better pick-up : The numbers tell the story. ICICI Bank's retail deposits are nudging Rs 60,000 crore (Rs 600 billion)
and in FY05, it grew its deposits by 47 per cent compared with the industry deposit growth of 14 per cent.

HDFC Bank's retail deposits are about Rs 23,000 crore (Rs 230 billion). Even in home loans, ICICI Bank commands
30 per cent of the market, having eaten into housing finance pioneer, HDFC's share.

Says Morparia, "The convenience proposition together with the geographical reach has paid off. We rolled out ATMs
far ahead of the others and were able to cross-sell our products."

HDFC ICICI
Mar-05
Bank Bank

Branches 467 565

ATMs 1,147 2,000

Cities 211 371

Retail assets (Rs crore) 18,000 56,000

Deposits (Rs crore) 38,000 99,800

Car loans (Rs crore) 2,500 11,500

Credit cards (Mn) 1.3 3

Retail customers (Mn) 6.4 13.7

Cost of deposits (%) 3.2 4.5

Net interest margin (%) 3.2 2.4

Net NPLs (%) 0.2 2

Even in the number of customers ICICI Bank leads by a distance (See table: Share of the wallet). Nearly 14 million
customers bank with ICICI Bank, while the number for HDFC Bank is less than half (6.4 million).
ICICI Bank has issued 3 million credit cards -- that is more than twice the number of HDFC Bank's credit card users.
However, industry observers point out that ICICI Bank's effective users for credit cards may not be high.

Nonetheless, they concede that even with a discounted customer base, the numbers will still be strong. Even in
businesses like online trading where the risks are relatively low, ICICI Bank commands a two-thirds marketshare.

Says Morparia, "We are the largest distributors of mutual fund products and RBI Bonds."

'Tell all' street

The stock market has always valued HDFC Bank at a huge premium -- at the current price of Rs 585, HDFC Bank is
valued at 3.5 times price to forward book (valuation based on estimated book value in FY 06 of Rs 165).

The multiple for ICICI Bank that quotes at Rs 415, is just 2.1 (estimated book value Rs 194). The reason: the
impeccable quality of HDFC Bank's balance sheet.

With NPLs of less than 0.2 per cent, compared with 2 per cent for ICICI Bank, its books are definitely in far better
shape.

HDFC Bank's operations are also more profitable -- its net interest margin at 3.2 per cent is way higher than that of
ICICI Bank's 2.4 per cent. Also, it is able to access deposits at a lower cost. On an average, it pays an interest of 3.2
per cent while ICICI Bank shells out 4.5 per cent.

Says Morparia, "We understand why the market gives a lower valuation. It's because we have more NPLs and we
have assets like Dabhol on our books. We had a legacy of high NPLs of 5 per cent."

Given its legacy, ICICI Bank has not done a bad job. Its net interest margin in FY05 at 2.4 per cent was an
improvement from the 1.9 per cent that it posted in FY04.

Moreover, net NPLs at 2 per cent in FY05 were down from 2.9 per cent in the previous year. ICICI Bank's cost of
deposits, too, has come down by 90 basis points to 4.5 per cent. Says an analyst, "Things are changing. In the past
the markets rewarded you for profitability. Now they will reward you for both growth and profitability."

SURVEY REPORT on COMPARATIVE STUDY:

Due to the stiff competition in non-monopolistic market, it is very difficult to do the analysis. But,
according to the survey few things about the banking strategy is clear:

1) Customer’s satisfaction of ICICI bank is far more satisfactory than HDFC Bank.
2) Customers are not willing to shift to other banks.
3) Internet banking is given more priorities than phone and mobile banking as additional services.
4) Other banks are also giving stiff competition to these banks.
5) Quality Service (SERVQUAL) of ICICI Bank is better than HDFC.
6) ICICI Bank future seems to more growing than HDFC Bank in long run (with respect to customer
attrition).
7) ATM availability of ICICI Bank is more than HDFC Bank.
8) According to survey, customers with saving accounts are more than current a/c.
9) Middle Class (mostly upper) customers are associated with ICICI Banks.

The graphical data are:

Customer Percentage

ICICI BANK
HDFC BANK
Other Banks
 5

4.5

3.5

3
ICICI Bank
2.5
HDFC Bank
2 Other Banks

1.5

0.5

0
Saving a/c Current a/c SERVQUAL

CONCLUSION:

Does sheer size tilt the balance in favour of ICICI Bank? Observes a consultant, "When you opt for a high growth
strategy, it's not necessary that you're always doing the smart thing. Scale has to be built with profitability otherwise it
is not a sustainable advantage."

While size and growth are important, success is also measured by other attributes such as margins and asset quality.
Size beyond a point becomes less important. If you are not in the top three, it becomes difficult to get visibility or
economies of scale. ICICI grown fast enough and reached a threshold level at which we have economies of scale.

However, consultants believe that HDFC Bank could have leveraged its parent's customers far more effectively to
cross-sell products and grow faster.

Says a banking consultant, "While HDFC Bank has about two years to get ready for the future, ICICI Bank probably
has three years." Should HDFC Bank and its parent be merged, it could catapult them to a new league.

But round one of the banking sweepstakes has clearly gone to ICICI Bank.