Icicibank vs Bajaj Finance Q2 FY24

ICICI Bank delivered a strong Q2 FY24 with PAT growing 35.8% YoY to INR 102.61 billion, driven by robust loan growth of 18.3% YoY and stable asset quality. Core operating profit rose 21.7% YoY to INR 143.14 billion, while NIM moderated to 4.53% from 4.78% QoQ due to deposit repricing. Management expects full-year margins similar to FY23. Retail and SME loans grew 21.4% and 29.4% YoY respectively, with unsecured portfolios performing well within risk parameters. The bank added 174 branches in the quarter and continues to invest in technology. Key risk: potential margin compression from continued deposit cost repricing and competitive pricing pressures in loans.

Guidance read

Full-year NIM similar to FY23: Management expects net interest margin for FY24 to be at a similar level as FY23 (4.53%), with some moderation from Q2 levels. Continued branch expansion: The bank added 174 branches in Q2 and 350 in H1, with plans to continue expanding based on micro-market opportunities. Technology investment at ~9% of opex: Technology expenses were about 9.2% of operating expenses in H1, and the bank will continue investing in technology, people, and distribution.

Risk read

Key risks include Margin compression from deposit repricing — NIM declined sequentially due to lagged impact of term deposit rate increases; further moderation expected in coming quarters.; Unsecured loan stress in industry — Analysts raised concerns about rising delinquencies in small-ticket unsecured loans; management downplayed risk for ICICI due to focus on upper segments.; Competitive pressure on loan pricing — Management acknowledged intense competition across mortgages, personal loans, and corporate lending, which could pressure yields.; Regulatory penalty on cross-selling — RBI imposed a fine for non-compliance related to cross-selling of non-financial products in 2020-21; corrective actions taken..

Promise ledger

Of 1 tracked promise, management 0 met, 0 close, 1 missed.

Bajaj Finance reported a strong Q2 FY24 with PAT of ₹3,551 crore, up 28% YoY, driven by robust AUM growth of 33% to ₹290,664 crore and disciplined cost management. The company added 3.58 million new customers, taking the total franchise to nearly 77 million. Asset quality remained healthy with net NPA at 31 bps. Management highlighted proactive portfolio actions, cutting 8-14% of business in urban/rural B2C segments to mitigate rising industry leverage. NIM compression of 14 bps sequentially was noted, with another 25-30 bps expected, offset by operating leverage. New initiatives like non-Bajaj Auto two-wheelers, car financing, and microfinance pilot are gaining traction. The board approved a ₹10,000 crore capital raise. Key risk: elevated competitive intensity and regulatory scrutiny on unsecured lending could pressure growth and margins.

Guidance read

NIM compression of 25-30 bps expected for full year: Management guided for another 25-30 basis points of NIM compression over the remainder of FY24, driven by rising cost of funds and competitive pressure on yields. ROA to sustain at 5% on exit basis: Despite NIM compression, the company expects to sustain a return on assets of 5% on an exit basis for FY24, supported by operating leverage. Microfinance pilot to expand to 100 locations by March 2024: The microfinance pilot launched in 12 villages will scale to 100 locations by March 2024, with a target of 300 villages by March 2025. Capital raise of ₹10,000 crore via QIP and preferential allotment: Board approved raising ₹10,000 crore, comprising ₹8,800 crore through QIP and ₹1,200 crore preferential allotment to Bajaj Finserv, to support growth.

Risk read

Key risks include Rising industry leverage in small-ticket loans — Management flagged that customers with multiple small-ticket loans (<₹50,000) show higher imprudence and default rates, prompting portfolio cuts of 8-14%.; NIM compression from rising cost of funds — Cost of funds is expected to rise as low-cost borrowings mature and are replaced at higher rates, compressing NIM by 25-30 bps for the full year.; Regulatory scrutiny on unsecured lending growth — Analyst raised concern about RBI's focus on unsecured loan growth; management acknowledged moderation in value but noted count growth remains elevated.; Potential risk weight increase on unsecured loans — Analyst asked about impact of possible risk weight hikes; management said they have levers to manage profitability but did not quantify impact..

Promise ledger

Of 1 tracked promise, management 1 met, 0 close, 0 missed.