Brokerages are positive ICICI Bank with ‘buy’ or ‘overweight’ calls after the lender's recently held analyst conference where the emphasis was on capital preservation, ‘Fair to Customer - Fair to Bank’ and ‘Customer 360’. According to them, one of the main reasons for strong growth potential of the lender is its focus on digital services.
According to brokerage firm Motilal Oswal Financial Services Ltd, when it comes to business transformation, powered by technological initiatives, ICICI Bank appears to be several notches above its competitors. These digital capabilities will allow the bank to produce better growth over the coming years, it believes.
Further, it said that the bank has been experiencing significant growth, driven by its digital capabilities and ongoing efforts to streamline client journeys and build brand trust.
"The bank remains our top pick in the sector, and we believe that besides the steady investment return, owning ICICI Bank stock also brings a sense of pride in every investor’s portfolio," added the brokerage.
Brokerage Morgan Stanley India Company Pvt Ltd believes that the stock should graduate to a compounding machine, and foresee continued re-rating over the next few years.
The brokerage expects large private banks like ICICI to make a big transition towards end-to-end digital originations, which suggests the possibility of significant operating leverage over the medium term.
"We believe the strong digital capabilities have helped ICICI improve market share in higher-margin segments, and there is further room to improve," added the brokerage house.
According to Jefferies, despite no takeaways for near-term earning per se, visibility of growth runway is positive.
"We see ICICI Bank delivering 19 percent CAGR in earnings over FY22-25E and ROE of 17 percent in FY24. Valuations are also reasonable and insights from analyst day improve medium term visibility on strengthening of franchise," the brokerage said.
IIFL Securities believes that the focus of the second-largest private bank is still on growing digital capabilities, creating micro-market strategies, increasing the wallet share of current customers to increase ROE, and employing partnership strategies to increase market share.
Further, it said that under Sandeep Bakshi's (MD & CEO) direction, this method is producing positive outcomes when combined with structural adjustments made at the HR level.
Although it still needs RBI approval, the Board has already extended his contract by three years, to October 2026.
In the brokerages view, continued execution on strategy remains a key to further gain profitable market share.
Kotak Institutional Equities said that the private bank will be at a stage where a strong outperformance is unlikely, but its comfortable to be positive given the strength of its go-to-market strategy.
The brokerage claims that the industry is experiencing moderate growth and low loan prices. This suggests that the stronger outperformance is probably associated with the weaker franchises.
For brokerage Emkay Global, the private bank remains its top fundamental pick on the basis of its superior financial performance beyond expectations, top-management stability, and strong capital/provision buffers.
"The bank clarified that it remains committed to staying aligned with regulatory guidelines on reducing stake in ICICI Lombard to 30 percent unless the regulator provides any dispensation," said the brokerage in its report.
According to the brokerage Axis Capital, ICICI Bank places a strong emphasis on capital preservation, conservative underwriting, rising fees, and ongoing investments in digital stacks, all of which are expected to increase efficiency.
Technology-related expenses now account for 9 percent of total expenses, up from 6 percent in FY20. As the bank continues to invest for growth, tech-related spending is likely to stay high.