Axis Versus ICICI Bank – Revisiting Performance Gap Over Recent Years: Motilal Oswal Analysis

ICICI Financial institution Ltd. has been delivering business main return on asset with the identical being ~50 foundation level increased than Axis Financial institution Ltd. over the previous few years.

Axis Financial institution’s elevated credit-deposit ratio will constrain credit score progress, whereas continued re-pricing of deposits will doubtless exert strain on margins within the coming quarters as nicely. The capitalisation degree for ICICI Financial institution stays robust with a tier-I ratio of 16%, which can allow wholesome progress trajectory, whereas wholesome accretion of retail deposits shall be a key progress enabler.

We thus estimate ICICI Financial institution’s mortgage ebook to register a compound annual progress fee of ~18% over FY24-26E vs. 16% for Axis Financial institution. Additionally, whereas ICICI Financial institution is positioned nicely to learn from working leverage and develop the enterprise on the again of robust technological investments, Axis Financial institution has been in an funding mode, which can thus maintain the distinction in cost-ratios of the 2 banks elevated.

Axis Financial institution is at present buying and selling at a 1.5 instances FY26E adjusted ebook worth and whereas the general valuations look affordable, the strain on key working metrics will restrict inventory efficiency within the close to time period and we proceed to desire ICICI Financial institution on regular return ratios and skill to ship superior progress.

We thus estimate ICICI Financial institution to ship FY26E return on asset/return on fairness of two.2%/17.8% versus Axis Financial institution RoA/RoE of 1.7%/17.1%.

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