Icicibank vs Bajaj Finance Q4 FY24

ICICI Bank reported a strong Q4 FY24 with PAT growing 17.4% YoY to INR 107.08 billion, driven by robust core operating profit growth of 10.5% YoY and controlled provisions. Domestic loan growth was 16.8% YoY, led by retail (19.4% YoY) and business banking (29.3% YoY). NIM moderated to 4.40% from 4.90% a year ago, but management expects it to remain range-bound. Operating expense growth slowed to 8.7% YoY (excluding one-offs), with headcount additions moderating. Credit quality remained stable with net NPA at 0.44%. Management sees opportunities for risk-calibrated growth and expects moderate OpEx growth. Key risk: potential further NIM compression if deposit costs rise more than anticipated.

Guidance read

NIM expected to be range-bound near current levels: Management expects net interest margin to remain range-bound in the near term until a rate cut occurs, with only modest further moderation possible. Operating expense growth to moderate: Management expects the pace of operating expense growth to moderate from the high levels seen in the last 12-15 months, driven by slower headcount additions and sourcing cost optimization. Credit cost to remain below 50 bps: Management indicated that credit costs, adjusted for seasonality, should remain under 50 basis points, with no dramatic increase expected.

Risk read

Key risks include NIM compression from deposit repricing — Further increase in deposit costs, including the 10 bps retail deposit rate hike in February, could lead to additional NIM compression until rate cuts materialize.; Competitive intensity in lending — While competitive intensity has moderated recently, it remains dynamic and could intensify again, pressuring lending yields and growth.; Operational risk incidents — A data breach involving 17,000 credit cards was disclosed; while corrective action was taken, such incidents could attract regulatory scrutiny and reputational damage..

Promise ledger

Of 3 tracked promises, management 3 met, 0 close, 0 missed.

Bajaj Finance reported a solid Q4 FY24 with AUM growth of 34% to INR 3,30,600 crore and PAT of INR 3,825.8 crore, up 21% YoY. Customer additions remained strong at 3.23 million, though loan bookings were impacted by RBI restrictions on eCOM and Insta EMI Card products. Rural B2C credit stress persisted, leading to slower growth in that segment. Management guided for FY25 as a normalization year, with AUM growth of 26%-28%, NIM compression of 30-40 bps over two quarters, and credit costs within 175-185 bps. OpEx-to-income is expected to improve by 20-40 bps. Key risks include delayed lifting of regulatory restrictions and elevated competitive intensity in mortgages.

Guidance read

AUM growth of 26%-28% in FY25: Management expects AUM to grow 26%-28% in FY25, supported by newly launched secured businesses like LAP, car finance, and tractor finance. NIM compression of 30-40 bps over next two quarters: Net interest margin is expected to moderate by 30-40 bps from current levels due to rising cost of funds and shift to secured assets, then stabilize. OpEx-to-income improvement of 20-40 bps: Operating expense to net interest income ratio is expected to improve by 20-40 bps from current levels as the company moves to consolidation. Credit costs within 175-185 bps corridor: Loan loss to average AUM is expected to remain in the 175-185 bps range, in line with pre-COVID levels adjusted for regulatory changes.

Risk read

Key risks include RBI restrictions on eCOM and Insta EMI Card not yet lifted — The embargo on two products continues to impact loan bookings and AUM growth; timing of removal is uncertain.; Rural B2C credit stress persists — Rural B2C business continues to show elevated loan losses, leading to slower growth; management has slowed AUM growth to 6% but risk remains.; Intense competition in mortgage space pressuring BHFL margins — Management noted 'madness' in mortgage competition, with home loans being distributed at 8.4-8.5% against borrowing costs of 8.3%, squeezing NIMs.; Potential ROE drag from excess capital — Management acknowledged that ROE in FY25 may marginally decline due to the recent capital raise, as excess capital sits on the balance sheet..

Promise ledger

Of 4 tracked promises, management 0 met, 0 close, 4 missed.