In its latest report, domestic brokerage firm KR Choksey has reiterated its positive stance on two of India's prominent private sector banks - ICICI Bank and IndusInd Bank. The report cites the growth opportunities presented by these banks, highlighting their potential for robust performance in the future.
ICICI Bank, the second-largest private sector lender in India, has shown robust growth momentum in all segments over the last few years. The brokerage highlights that the bank has outperformed its peers by gaining market share across its core segments.
The brokerage firm notes that the bank's focus on building a granular portfolio and improving its liabilities franchise, specifically in the core retail segment, will result in sustainable growth in the long run.
"We believe the aim of increasing its market share in the credit business and strengthening the liability franchise bodes well for the bank in the longer run, given a healthy systemic growth assumption going ahead led by a strong pickup in corporate loans books owing to increased infrastructure boost," said KR Choksey.
The brokerage predicts that the bank's loan book will grow at a CAGR of 18.5% while deposits will grow at a CAGR of 12.7% over FY22–25E.
Furthermore, ICICI Bank has been working on strengthening its balance sheet and maintaining adequate capital to manage the volatility of the operating environment. The bank has witnessed a balance sheet growth of 13.4% CAGR over FY20-22, and the brokerage expects that it will continue to strengthen further.
The bank has also been focusing on enhancing its digital offerings and platforms to provide seamless onboarding for new customers and personalized solutions. As a part of this, the bank has adopted a ‘Bank to BankTech’ strategy with several digital innovations & channels and has entered multiple partnerships with technology businesses and platforms to capitalize on growth prospects.
The brokerage has retained its "buy" rating on the stock with a SoTP-based target price of ₹1,175 apiece, which hints towards an upside of 35.37% from the stock's latest closing price.
IndusInd Bank, on the other hand, has emerged as one of India's fastest-growing private banks. The bank continues to strengthen its business by focusing on retail segments.
The bank maintains its guidance of delivering a 20% plus growth in loan books by FY23E, supported by its PC-5 strategy, and it expects robust growth in the liability franchise, especially in retail deposits, and an expanding geographical presence to improve the loan book's prospective growth, said the brokerage.
In the past few quarters, IndusInd Bank has witnessed strong growth in retail disbursement, and the brokerage expects the loan book to grow at a 19.7% CAGR over FY22–25E, driven by higher disbursements and improving growth momentum across all segments.
The bank has a healthy operating profit margin, which is one of the best in the banking industry. Going ahead, the brokerage anticipates pre-provision operating profit (PPOP) to grow at a 16.5% CAGR over FY22–25E, led by a stable cost-to-income ratio and healthy NII.
Net profit for the bank has seen a growth of 2.2% CAGR over FY20-22, which was impacted due to higher provisions owing to higher NPAs in FY20 & FY21, which started to moderate from H1-FY22.
Going forward, KR Choksey expects the PAT to grow at a CAGR of 32.7% over FY22–25E on the back of healthy operating performance and lower credit costs.
The asset quality is expected to remain stable, and profitability improvements will boost return ratios. The brokerage expects ROA/ROE to reach 1.8%/15.6% in FY25E from 1.1%/9.7% in FY22, respectively.
KR Choksey has maintained its "buy" call on the stock with a target price of ₹1,550 apiece, which reflects an upside of 38.26% from the stock's previous closing price.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
