scorecardresearchICICI Bank: Should you buy the stock after Q4 earnings? Here's what brokerages
ICICI Bank’s gross bad loans as a percentage of its loan book came down to 2.81 percent from 3.60 percent a year ago.

ICICI Bank: Should you buy the stock after Q4 earnings? Here's what brokerages say

Updated: 25 Apr 2023, 03:24 PM IST
TL;DR.

Analysts retained their positive view on the lender with expected potential upside of up to 41 percent after its March quarter results driven by its strong performance in all aspects from all-time high NIMs to profit, loan growth, asset quality, etc.

Analysts remained bullish on ICICI Bank after it posted strong results for the quarter ended March 2023. The private sector lender beat Street estimates with its net profit rising 30 percent YoY to 9,121.9 crore. Meanwhile, its net interest income (NII) rose 40.2 percent to 17,667 crore from 12,605 crore in the corresponding quarter last year.

Its net interest margin (NIM) was 4.90 percent in Q4 FY2023 compared to 4.00 percent in Q4 FY2022, and 4.65 percent in Q3 FY2023. ICICI Bank’s gross bad loans as a percentage of its loan book came down to 2.81 percent from 3.60 percent a year ago. Its net non-performing assets also declined by 25.9 percent YoY and 8.8 percent sequentially to 5,155 crore ($627 million) for the quarter ended March 31, 2023. Further, its net NPA ratio also declined to 0.48 percent from 0.76 percent a year ago and 0.55 percent in the previous quarter.

The management indicated that upgrades and recoveries have increased, a sign of improvement. Recoveries and upgrades were 4,283 crore in the quarter ended March.

Analysts retained their positive view on the lender with an expected potential upside of up to 41 percent after its March quarter results driven by its strong performance in all aspects from all-time high NIMs to profit, loan growth, asset quality, etc.

HDFC Securities: The brokerage has a ‘buy’ call on the stock with a target price of 1,165, indicating an upside of over 31 percent.

As per the brokerage, ICICI Bank reported yet another all-round impressive performance with strong loan growth (+19 percent YoY), all-time high NIMs (4.9 percent) and continued robust asset quality (GNPA at 2.8 percent), translating into record standalone RoA (return on asset) of 2.4 percent. The bank opportunistically shored up its contingent provisions (16bps), on the back of near-zero net slippages, taking the stock of contingent provisions to 130 bps, it added. The brokerage expects current levels of peak profitability to moderate as ICICI Bank ups its pace of deposit mobilisation and incremental NIMs reflect a catch-up in lagged deposit re-pricing. The brokerage has tweaked its FY24E and FY25E forecasts marginally to factor in moderation in NIMs and higher opex from branch addition.

Source: HDFC Sec
Source: HDFC Sec

Sharekhan: The brokerage has a ‘buy’ call on the stock and sees an upside of nearly 27 percent for the private sector lender.

The bank reported strong performance on all fronts – NII, core operating profits, earnings, advances and deposits – recording healthy growth with better asset-quality trends and negligible core credit cost, noted the brokerage. It believes the bank is on a sustainable growth path trajectory. Ahead of the new capex growth cycle, the bank is already positioned well with superior margins, strong RoE, asset quality, contingency buffers and robust capitalisation levels. It further stated that now in terms of ROA expansion, levers from here on - only operating leverage can help which could be partly offset by a moderation in NIM. Thus, strong outperformance and further re-rating from here on is likely to be a very gradual one, based on sustainable performance and quality earnings, it added.

Axis Securities: The brokerage has a ‘buy’ call on the stock with a target price of 1,150, indicating an upside of 30 percent. The brokerage continues to like ICICI Bank for its (1) strong retail-focused liability franchise, (2) buoyant growth prospects, (3) stable asset quality along with healthy provision cover, (4) adequate capitalization, and (5) potential to deliver robust return ratios.

"In FY23, ICICI delivered a stellar performance, ticking all the boxes on growth, margins, profitability and asset quality. Going forward, though the growth outlook continues to remain encouraging, margins having peaked out will witness moderation as CoF catches up. With the bank investing in branch expansion in FY24, we expect opex ratios to remain at 39-40 percent levels. Factoring in the margin pressures and higher opex, we trim our PPOP growth estimates by 3-5% over FY24-25E. However, backed by pristine asset quality thereby keeping credit costs benign, we remain confident in ICICI’s ability to deliver RoA of over 2 percent over the medium term," it explained.

Prabhudas Lilladher: The brokerage has a ‘buy’ call on the stock with a target price of 1,130, indicating an upside of 28 percent.

"ICICI Bank saw a steady quarter with core PAT largely in-line. Better NIM at 5.3 percent was offset by higher opex due to one-time employee costs. Loan growth was 4.7 percent QoQ (in-line), led by retail/SME while asset quality was superior due to lower net slippages. Bank further fortified its balance sheet, as provisions for Q4FY23 were mainly contingent in nature. Buffer provisions at 129 bps are best in class. As the focus would be on sustaining growth, branch accretion in FY24E would be higher than in FY23 (482 branches). Thus, we are factoring a higher opex CAGR of 17 percent over FY23-25E (earlier 14 percent) and lower FY24/25E earnings by 2 percent. ICICI remains our preferred pick due to strong earnings quality and superior deposit profile," said the brokerage.

Emkay: The brokerage is bullish on the stock post its March quarter results with a target price of 1,250, indicating an upside of 41 percent.

For Q4FY23, ICICI Bank has yet again reported a healthy earnings beat led by continued superior margin delivery and contained credit cost, stated the brokerage. ICICI Bank continues to scale up its contingency buffer despite no visible asset-quality deterioration and, thus, the brokerage believes that this seems to be an earnings-normalization strategy.

It expects the bank to deliver the best-ever RoA and RoE of 2.0-2.2 percent and 17-18 percent, respectively over FY24-26E, led by structurally strong margins and, thus, core profitability, while the contingent buffer will protect profit & loss from any asset-quality bumps. The recent RBI’s approval to HDFC to increase its stake in the insurance business should take out stake sale overhang on ICICI Lombard as well, it noted.

ICICI Bank remains Emkay's top pick in the banking space, given its superior financial performance, top-management stability/credibility and strong capital/provision buffers.

 

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Source: Emkay
Source: Emkay
First Published: 25 Apr 2023, 03:24 PM IST