Shares of ICICI Bank traded with nominal gains in intraday trade on BSE on January 23 even though the bank reported a strong December quarter scorecard which kept brokerages remain upbeat about the stock.
On January 21, the bank reported a 34.19 percent year-on-year (YoY) growth in its net profit at ₹8,311.85 crore for Q3FY23 against a profit of ₹6,193.81 crore in the same quarter a year ago.
Net interest income jumped by 34.6 percent to ₹16,465 crore in Q3FY23, against ₹12,236 crore in the same quarter last year.
Net interest margin also increased to 4.65 percent in Q3 of the current fiscal compared to 3.96 percent in Q3FY22.
Provisions and contingencies in the current quarter scaled up to ₹2,257.44 crore as against ₹2,007.30 crore in Q3FY22.
As reported by Mint, ICICI Bank said that during Q3, it changed its provisioning norms on nonperforming assets to make them more conservative. This change resulted in higher provisions amounting to ₹1,196 crore in Q3-2023. Provisions for Q3-2023 also include a contingency provision of ₹1,500 crore made on a prudent basis.
Gross NPA dropped to 3.07 percent as of December 31, 2022, from 4.13 percent as of December 31, 2021. The net NPA ratio declined to 0.55 percent in Q3FY23 from 0.85 percent in Q3FY22.
Shares of the private sector lender rose more than percent in morning trade but erased most gains to trade marginally higher even though the market benchmark Sensex was up about half a percent.
The stock has outperformed the benchmark Sensex in the last one year.
Brokerages upbeat
Most broking firms are positive about the stock for the medium to long term. Many of them have retained their buy view and see healthy double-digit growth in the stock price.
Brokerage firm Motilal Oswal Financial Services maintained a buy call on the ICICI Bank stock with a target price of ₹1,150.
Motilal Oswal pointed out that ICICI Bank reported another strong quarter with in-line earnings despite making contingent provisions of ₹1,500 crore and ₹1,196 crore toward NPAs due to strict provisioning norms.
Motilal said the bank's asset quality performance was exemplary as the GNPA and NNPA ratios and PCR improved further. The bank now has a total contingency buffer of ₹11,500 crore.
Business growth was strong and broad-based across retail and corporate segments. The bank continued to invest in tech and digital initiatives to further boost growth momentum, said Motilal.
"With a floating-rate book of 70 percent, we think the bank is well placed to ride the rising interest rate environment. We estimate ICICI Bank to deliver RoA and RoE of 2.2 percent and 17 percent, respectively, in FY25," said the brokerage firm.
Brokerage firm Emkay Global also maintained its buy call on the stock with a target price of ₹1,250 and said the stock remains its top pick in the banking space, given its superior financial performance, top-management stability and credibility, and strong capital and provision buffers.
"We believe ICICI Bank is best placed among large private banks to deliver growth and absorb any macro or asset-quality shock, given healthy provisions and capital buffers. We expect the bank to deliver the best-ever RoA and RoE of 2.1-2.2 percent and 17-18 percent, respectively, over FY23-25E because of strong margins and lower LLP," said Emkay Global.
Brokerage firm Nirmal Bang Institutional Equities also maintained a buy call on the stock with a target price of ₹1,174.
"ICICI Bank reported strong Q3FY23 performance, which was higher than our estimates on the back of high margins and healthy credit growth. Operating profit increased by 30.8 percent YoY (13.6 percent QoQ) and was nearly 7.7 percent above our estimate. We remain positive on ICICI Bank given its growth outlook and earnings trajectory," said Nirmal Bang.
Nuvama Institutional Equities also maintained its buy call on the stock with a target price of ₹1,115.
The brokerage firm believes that the bank's NIM will decline with a lag to the sector as ICICI reprices EBLR loans at T+90. It now has the highest PCR at 101 percent of stress, higher than HDFC Bank.
"With a high base of NIM and provisions and a strong retail franchise, we believe ICICI is better equipped,
versus peers, to navigate FY24 even when RBI stops rate hikes. While results were not as perfect as in the last eight quarters, we reiterate ‘buy’ as we expect sequential loan/fee growth to pick up in Q4FY23E and NIM to stay stronger for longer. ICICI remains among our top picks," said Nuvama.
According to a MintGenie poll, an average of 40 analysts have a ‘strong buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of the broking firms. These do not represent the views of MintGenie.
