Icicibank vs Bajaj Finance Q1 FY24

ICICI Bank reported a strong Q1 FY24 with PAT up 39.7% YoY to INR 96.48 billion, driven by robust loan growth of 18.1% YoY and NII expansion of 38% YoY. Core operating profit less provisions grew 38% YoY to INR 125.95 billion, supported by healthy fee income and controlled credit costs. NIM compressed sequentially to 4.78% due to lagged deposit repricing, but management expects stabilization in 2-3 quarters. Asset quality improved with GNPA at 0.48% (down from 0.70% YoY). The bank continues to invest in technology and distribution, with employee expenses rising 36.3% YoY. Guidance remains positive on growth, though cost of deposits may rise further. Risk: unsecured loan growth (40.6% YoY) could face regulatory scrutiny if industry stress emerges.

Guidance read

Cost of deposits to increase for next 2-3 quarters: Management expects cost of deposits to continue rising for the next couple of quarters due to repricing of maturing deposits and incremental growth. Continue investing in technology, people, and distribution: The bank will maintain investments in technology, employee hiring, and branch expansion to drive franchise growth. Focus on risk-calibrated profitable growth: Management aims to grow market share across key segments while maintaining prudent provisioning and strong capital levels.

Risk read

Key risks include Unsecured loan growth may attract regulatory action — Rapid growth in personal loans and credit cards (40.6% YoY) could lead to higher NPAs or regulatory risk-weight increases if industry stress emerges.; NIM compression from rising deposit costs — Cost of deposits is expected to rise for 2-3 quarters, pressuring NIMs further before stabilization.; Employee cost growth outpacing revenue — Employee expenses grew 36.3% YoY due to hiring and increments; if revenue growth moderates, operating leverage may be delayed.; Competitive pressure in corporate lending — Pricing pressure in wholesale lending persists, though ICICI Bank focuses on ecosystem-based relationships to maintain returns..

Promise ledger

Scorecard data is being built as historical quarters are processed.

Bajaj Finance delivered an excellent Q1 FY24 with PAT of INR 3,437 crore (up 32% YoY) and AUM growth of 32% to INR 2.7 lakh crore, the highest ever quarterly addition of INR 22,718 crore. The company booked 9.94 million loans and added 3.84 million new customers, with customer franchise reaching 73 million. Asset quality remained pristine with GNPA at 87 bps and NNPA at 31 bps. Management raised long-term ROE guidance to 21-23% from 19-21%. Key driver was strong demand across segments, especially B2B and consumer durables. Guidance: AUM growth of 29-31% for FY24, credit cost of 155-165 bps, and NIM compression of 10-15 bps in Q2 and Q3. Risk: rising consumer leverage in the system, particularly in personal loans, which management is proactively monitoring and tightening filters on rural B2C.

Guidance read

AUM growth of 29-31% for FY24: Management raised full-year AUM growth guidance from 27-29% to 29-31%, driven by strong Q1 momentum. Credit cost guidance of 155-165 bps for FY24: Full-year credit cost expected to be range-bound between 155-165 bps, including 6-8 bps from model redevelopment. NIM compression of 10-15 bps in Q2 and Q3: Net interest margin expected to compress by 10-15 bps each in Q2 and Q3 due to repricing of borrowings. New car financing to reach INR 200-250 crore per month by March 2024: New car financing business, launched in 80 cities, is expected to achieve monthly disbursements of INR 200-250 crore by exit of FY24.

Risk read

Key risks include Rising consumer leverage in personal loans — Management flagged increasing leverage in the system, especially in personal loans, and is taking preemptive actions to tighten underwriting.; Rural B2C portfolio stress — Rural B2C portfolio flagged as yellow due to elevated risk; business has been cut by INR 200-250 crore per month.; NIM compression from rising cost of funds — Cost of funds rose 82 bps over three quarters, with NIM compression expected to continue for two more quarters.; Potential impact of economic slowdown on asset quality — Analyst raised concern about unsecured loan growth; management acknowledged but expressed confidence in underwriting..

Promise ledger

Scorecard data is being built as historical quarters are processed.