Top Indian private banks, HDFC Bank, ICICI Bank and Axis Bank, have reported their Q4 results with the lenders showing a decent growth in its net profit and net interest income (NII) along with contracting net interest margin.
The fourth quarter of FY24 for these private sector banks was marked by a faster increase in deposits amid moderating credit growth.
ICICI Bank share price rallied over 4% to a record high on Monday with its market capitalization crossing 8 lakh crore for the first time after strong Q4 results. Axis Bank share price also surged over 2% to hit an all-time high after the announcement of Q4 earnings.
Read here: Axis Bank share price hits lifetime high after Q4 results 2024. More steam left?
All these three top private lenders HDFC Bank, ICICI Bank, and Axis Bank reported a faster deposit growth in Q4FY24 as compared with the credit growth.
However, analysts expect these banks to continue to perform well going ahead, while margins to continue to remain under pressure for HDFC Bank.
“The private sector lenders, HDFC Bank, ICICI Bank and Axis Bank have given a decent performance in Q4 and will continue to do so going forward. However, the only concern was with respect to credit-to-deposit (CD) ratio. We do not expect a big correction in the asset quality of the banks,” said Anwin Aby, Fundamental analyst at Geojit Financial Services.
He prefers ICICI Bank and Axis Bank among top banking stocks to buy after Q4 results.
Here’s a review on HDFC Bank, ICICI Bank and Axis Bank Q4 results:
HDFC Bank
HDFC Bank, the largest private sector lender in India, reported a net profit of ₹16,511 crore for the quarter ended March 2024, registering a 0.84% rise from ₹16,373 crore in the previous quarter. The bank’s net interest income (NII) rose two ₹29,007 crore from ₹28,470 crore in the previous quarter.
After the Q3 miss, HDFC Bank largely ticked all the boxes in Q4 – delivering better – than – expected deposit growth, positively surprising on the margin front to 3.63% despite the sharp fall in LDR to 104% and accelerated branch expansion, analyst at Emkay Global said.
Read here: HDFC Bank Q4 Results: Net profit at ₹16,512 crore, NII rises two ₹29,007 crore; dividend declared
Going forward, as per management, ramping up retail deposits and margin management amid potential pressure from lower incremental LDR/inorganic PSL build-up (from Oct-25) to meet sub-targets will take precedence over credit growth, said Anand Dama, Senior Research Analyst, Emkay Global Financial Services.
Factoring in slower growth, Emkay Global trimmed its earnings estimates for FY25-26E by ~7%. However, it retained a ‘Buy’ rating and cut HDFC Bank’s share price target to two ₹2,000 from ₹2,100 earlier.
ICICI Bank
ICICI Bank reported a rise of 17.4% in its Q4 standalone net profit at ₹10,707.5 crore from ₹9,121.9 crore in the corresponding period last year. The second-largest private sector lender in India reported a growth of 8% in net interest income (NII) to ₹19,092.8 crore from ₹17,666.8 crore in the same period last year.
The bank’s provisions more than halved to ₹718 crore in the fourth quarter of FY24, while the asset quality improved.
Credit growth moderated to 16% YoY and 3% QoQ, mainly due to corporate drag. Meanwhile, deposit growth has been far stronger at 20% YoY and 6% QoQ, while the CASA ratio has meaningfully improved by 400 bps QoQ to 42%, unseen in peer banks. This, along with better loan yields due to a higher retail mix, led to only a 3 bps QoQ contraction in margins to 4.4%.
Read here: ICICI Bank Q4 Results: Net profit rises 17% to ₹10,707 crore, NII up 8% YoY; dividend declared
Emkay Global expects ICICI Bank to deliver higher RoA at 2.1% – 2.3% and RoE at 17-18% over FY25 – FY26, mainly on the back of healthy margins, fees and lower LLP.
“ICICI Bank remains our preferred pick in the banking space, given its superior returns profile, top-management credibility, and strong capital / provision buffers,” said Dama.
The brokerage retained its ‘Buy’ rating on the stock and raised the ICICI Bank share price target to two ₹1,450 apiece, pious ₹1,400 earlier.
Axis Bank
Axis Bank reported a net profit of ₹7,130 crore, compared to a loss of ₹5,728.4 crore in the corresponding period last year. The private sector lender’s net interest income (NII) rose 11.5% YoY to ₹13,089 crore. Its net interest margin (NIM) for Q4FY24 stood at 4.06%, growing 5 bps QoQ.
Axis Bank posted slower credit growth, at 14% YoY and 3.5% QoQ, mainly due to slower corporate growth and some growth slowdown in the SME book. On the other hand, deposit growth was reasonably strong at 13% YoY and 6% QoQ, mainly led by higher growth in CASA contributing nearly 56% of the incremental deposits and thus leading to 85 bps improvement in CASA ratio to 43%.
Read here: Axis Bank Q4 Results: Net profit at ₹7,130 crore, NII rises 11.5% YoY, dividend declared; 5 key highlights
This restricted cost of funds (CoF) expansion which, along with better loan yield owing to higher retail share, led to 5 bps margin expansion to 4.16%.
Emkay Global expects the bank to log a healthy RoA of ~1.8% over FY25 – FY27, albeit lower than peers’. Given the <15% CET 1 versus peers, Axis Bank has recently taken an enabling resolution to mobilize equity capital to the tune of ₹20,000 crore or 2% of RWA, if the need arises.
It believes the valuations remain low at 1.5x FY26E ABV versus some large peers’ at >2x. Thus, the brokerage firm retained its ‘Buy’ rating and raised Axis Bank’s share price target to two ₹1,400 p.m ₹1,350 earlier.
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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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