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Informist, Thursday, Apr. 17, 2025

--Fitch affirms ICICI Bank's outlook at stable 

--Fitch affirms ICICI Bank at BB+; upgrades viability rtg to bb+ 

--Fitch affirms Axis Bank at BB+, outlook stable 

NEW DELHI – Fitch Ratings on Thursday affirmed Axis Bank and ICICI Bank's long-term issuer default rating at BB+, with a stable outlook for both. The rating agency also upgraded ICICI Bank's viability rating to 'bb+', from 'bb' owing to improved financial metrics and loss-absorption buffers, which is expected to be sustained.  

"ICICI's long-term IDR (issuer default rating) is driven by its standalone credit profile, as indicated by its VR (viability rating), which is now at the same level as its GSR (government support rating)," Fitch ratings said. According to the rating agency, ICICI Bank will be systemically important, underpinned by its large market share of 6-7% of system loans and deposits at the end of FY24 and its significant franchise.

Fitch expects ICICI Bank to maintain an elevated risk appetite, focusing on higher-yielding loans to offset margin pressure. "While unsecured personal loan growth was sharply lower due to asset quality issues, we believe this is temporary, given the bank's elevated risk appetite. We expect overall loan growth to increase, but stay below the FY21-FY24 CAGR of 17%," it said. 

The rating agency also revised ICICI Bank's asset quality score to 'bb' from 'bb-' and the outlook to stable from positive due to improved impaired loans ratio, which is expected to be sustained at current levels. It also revised the bank's earnings and profitability score to 'bb+' from 'bb' owing to improved profitability in recent years and expectation that the operating profit or risk-weighted asset ratio will be sustained above 3.5%.

Fitch Ratings expects a moderate increase in ICICI Bank's loan-deposit ratio as the bank aims to balance loan and deposit growth. It also expects Axis Bank's loan-deposit ratio to rise further by FY27 but remain below previous highs as the bank strives to expand its deposit franchise to support loan growth.

Axis Bank's robust local franchise, particularly in retail, and above-average capitalisation should support through-the-cycle business and revenue generation for the lender, contingent on effective management of its loan-to-deposit ratio and risk appetite, which are currently facing some pressure, Fitch said.

The rating agency expects Axis Bank's loan growth to rebound over the next two years from 8.7% in Apr-Dec FY25. However, it sees the bank's appetite for riskier, higher-yielding loans to remain above the sector average, weighing on its risk profile assessment. "Its ability to withstand and manage pressures in its unsecured retail loan segment will also be important in assessing the bank's risk control mechanisms, considering its above-average growth in the past," it said.

Fitch Ratings also revised the outlook on Axis Bank's 'bb' asset quality score to 'stable' from 'positive' as the bank's elevated impaired-loan formation reflects pressures from unsecured retail loans, it said.  End

Reported by Pratiksha

Edited by Subhojit Sarkar

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