Fitch Affirms Axis Bank, ICICI Bank Ratings; Upgrades ICICI’s Viability Rating

Fitch Ratings on Thursday affirmed the long-term issuer default rating of Axis Bank and ICICI Bank at BB+, with a stable outlook for both lenders.

The ratings agency also upgraded ICICI Bank’s viability rating to bb+ from bb, citing improved financial metrics and stronger loss-absorption buffers that are likely to be sustained.

"ICICI’s long-term IDR is driven by its standalone credit profile, as indicated by its VR, which is now at the same level as its GSR," Fitch said. It noted ICICI Bank’s systemic importance, backed by a 6–7% market share of system loans and deposits at the end of 2023-24 and a strong franchise.

Fitch expects ICICI Bank to retain a high risk appetite, with a focus on higher-yielding loans to offset margin pressure. The recent slowdown in unsecured personal loan growth is seen as temporary, the agency said, and forecast that overall loan growth would remain below the 2020-21–2023-24 compound annual growth rate of 17%.

The agency also upgraded ICICI Bank’s asset quality score to bb from bb- and revised its outlook to stable from positive. The bank’s impaired loans ratio has improved and is expected to remain stable. Fitch also raised the lender’s earnings and profitability score to bb+ from bb, based on stronger profitability and expectations that the operating profit to risk-weighted assets ratio will stay above 3.5%.

The loan-deposit ratio for ICICI Bank is expected to rise moderately, as the bank balances loan and deposit growth, Fitch said.
For Axis Bank, the agency expects the loan-deposit ratio to increase further by 2026-27 but remain below previous highs. Axis Bank’s solid retail franchise and above-average capitalisation support long-term business and revenue generation, though its loan-deposit ratio and risk appetite are under pressure.

Fitch forecasts Axis Bank’s loan growth to pick up over the next two years from 8.7% in April–December, though the lender’s preference for higher-risk, higher-yielding loans may weigh on its risk profile.

The agency also revised the outlook on Axis Bank’s bb asset quality score to stable from positive, due to increased impaired-loan formation linked to unsecured retail loans.