ICICI Bank vs Axis Bank: Which private sector lender should investors choose for long term?

The Nifty Bank index has been very volatile in 2024 so far. The index has lost 0.23 percent this year so far but has recovered a bit lately, rising 1.2 percent in the last one month.

Banking stocks look poised for strong performance. In Q4, banks reported results that largely met expectations, highlighting healthy credit growth, improved deposit mobilisation, a moderating pace of margin compression, and strong asset quality metrics. Experts anticipate that banks will maintain this robust performance into FY25.

Let's find out between ICICI Bank and Axis Bank, which private sector lender offers better long-term investment opportunities.

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Stock Price Trend

Both the private bank stocks have outperformed benchmark Nifty Bank in 2024 YTD, however, between the two, ICICI is the better performer. ICICI has gained 13 percent this year so far while Axis has added over 3 percent in this period.

This year so far, ICICI has given positive returns in 4 of the 5 months while Axis has been positive in just 2. ICICI shed over 2 percent in May, snapping after 6 straight months of gains since November 2023. Between November 2023 and April 2024, the stock has surged almost 26 percent. Just in 2024 YTD, ICICI rose 5.2 percent in April, 3.9 percent in March, 2.7 percent in February, and 2.8 percent in January.

Axis, on the other hand, also lost over 2 percent in May after an 11.3 percent rally in April. However, it declined 2.6 percent in March. Before that, it was up 0.7 percent in February and was down 3.2 percent in January.

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Meanwhile, in the last 1 year, Axis has given better returns. ICICI has advanced 18.5 percent versus a 24 percent rise in Axis. In comparison, Nifty Bank has gained over 9.5 percent in this time.

Despite the volatility, both ICICI and Axis hit their record highs last month. ICICI hit its new high of ₹1,169.30 on April 30, 2024. Currently trading at ₹1,126, the scrip is just around 4 percent away from its peak. However, it has risen over 25 percent from its 52-week low of ₹898.85, hit on October 26, 2023.

Similarly, Axis touched its record high of ₹1,182.80 on April 30, 2024, as well. Currently trading at ₹1,139, it is also around 4 percent away from that peak. However, it has jumped over 25 percent from its 52-week low of ₹909.45, hit on May 19, 2023.

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Moreover, in the long term, 3 years, again, ICICI has emerged as the winner. It has jumped over 75 percent while Axis has advanced 56 percent.

Earnings

In the March quarter (Q4FY24), ICICI Bank posted a 17.4 percent YoY jump in its standalone net profit at ₹10,707.5 crore as against ₹9,121.9 crore in the corresponding period last year. Meanwhile, its NII (net interest income) grew 8 percent YoY to ₹19,092.8 crore in the quarter under review versus ₹17,666.8 crore in the same period last year. It also witnessed marginal compression in net interest margin to 4.40 percent in Q4FY24. Furthermore, the provisions more than halved to ₹718 crore for the reporting quarter. Its asset quality also improved. ICICI's gross NPA stood at 2.16 percent, down from 2.81 percent in the same quarter last year.

The board recommended a dividend of ₹10 per share.

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On the other hand, Axis Bank reported a net profit of ₹7,130 crore in the March quarter as against a loss of ₹5,728.4 crore in the corresponding period last year. The private sector lender's NII, meanwhile, jumped 11.5 percent YoY to ₹13,089 crore in Q4FY24 as compared to ₹11,742 crore in the year-ago period.

On the asset quality front, the bank reported a gross NPA of 1.43 percent in Q4FY24 against 1.58 percent in Q3FY24. Net NPA came in at 0.31 percent against 0.36 percent QoQ.

“In FY24, Axis Bank charted a course of steady progress. While we relentlessly focused on our key priority areas - Bharat Banking, Digital and Sparsh, I believe we were also nimble in picking up some enticing new opportunities that came our way. Our Citi integration is on track, and we are inching toward the final milestone in the next six months," said Amitabh Chaudhry, MD & CEO, Axis Bank.

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Which private sector lender stock should you pick for long term?

Vinnaayak Mehta, Financial & Stock Advisor, Founder, The Infinity Group, likes ICICI Bank better than Axis Bank.

When considering which private sector lender to pick for the long term between ICICI Bank and Axis Bank, investors should weigh several factors. Both banks have demonstrated positive growth in net profit and net interest income (NII) for Q4, indicating robust core banking operations and proficiency in income generation from their loan portfolios. However, it's important to note that credit growth has moderated for both banks, potentially due to economic sluggishness or increased risk aversion among lenders.

Despite the slowdown in credit growth, both ICICI Bank and Axis Bank have seen a rise in share prices following their Q4 results, suggesting investor confidence in their long-term prospects. Given the current scenario, ICICI Bank emerges as a potentially strong pick. Its recent performance reflects resilience and a strategic approach that positions it well for sustainable growth in the future.

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Dnyanada Vaidya, Research Analyst - BFSI, Axis Securities, also prefers ICICI over Axis. 

Despite multiple headwinds, ICICI Bank delivered a strong performance in FY24. The bank has consistently reported a solid all-around performance across operational metrics. We expect the bank to continue its strong performance delivery over the medium term, registering consistently robust return ratios supported by demand-led credit growth, a steady C-D Ratio, adequate capitalisation, and strong asset quality metrics. ICICI Bank remains our most preferred pick amongst banks for the medium-long term. It is important to note that Axis Securities doesn't have coverage on Axis Bank.

Jignesh Shial, Director - Research, Head of BFSI Sector at InCred Capital, as well, picked ICICI between the two.

We prefer ICICI Bank due to superior returns and are cautious on Axis Bank given the volatility in loan growth, asset quality and rising margin pressure.

Similarly, Sujit Modi, Chief Investment Officer (CIO), Share.Market, is also in favour of ICICI Bank.

Between ICICI Bank and Axis Bank, choosing the better private sector lender for long-term investment requires a detailed evaluation. According to our research, ICICI Bank consistently matches or surpasses Axis Bank across all evaluated factors.

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Both stocks score exceptionally high on Value and Low Volatility, making them attractive to conservative investors. However, ICICI Bank outperforms Axis Bank in terms of Momentum, Quality, and Sentiment.

Overall, ICICI Bank emerges as a superior choice, combining quality, favorable price momentum, and analyst support, while still offering compelling valuations. Nonetheless, both banks exhibit low stock volatility, making them suitable additions to conservative investment portfolios.

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 taking any investment decisions.