Maintain BUY on ICICI Bank - Future-proofed and poised for market share gains - HDFC Securities

Mr. Krishnan ASV, Institutional Research Analyst, HDFC Securities

ICICI Bank (ICICIBC) clocked an impressive all-round performance across metrics demonstrating high-quality market share gains on both sides of the balance sheet, strong operating profits and a future-proofed balance sheet to capitalise on tailwinds from receding competitive intensity. On the back of rising granularity on both sides of the balance sheet, industry-leading technology initiatives for new-to-bank (NTB) business sourcing, ICICI Bank is poised to scale its 15% ROE and above-industry growth aspirations. Despite macro-headwinds stemming from the second wave of the pandemic, we see limited speedbumps in ICICI Bank's continued journey towards high growth and superior profitability. Maintain BUY with revised SOTP price of INR649.

Balance sheet delivers strong all-round operating performance: ICICI Bank delivered a strong operating performance with 17% YoY NII growth, C/I ratio at 41% and credit costs at 1% (adjusted for COVID provisions). Loan growth was healthy at 14% YoY, driven by retail home loans and business banking while an increasingly granular deposit franchise (CASA up 117 bps YoY) drives an industry-leading cost of funds (4.05%).

Stress pool remains range-bound; adequate provisions provide comfort: ICICI Bank's stressed pool (BB & below book) remains low at 0.4% of loans, along with 4QFY21 gross slippages at 3.1% (FY21: 2.3%) in a pandemic year. With improving portfolio ratings and increasing mix and granularity of retail loans, we expect slippages and credit costs to moderate during FY22 on the back of surplus provisioning buffer (~2% of loans) during the year.

Superior franchise poised for sustained re-rating: ICICI Bank seems on track to achieve 1.8% RoA by FY23 on the back of reflating NIMs (exercising of pricing power) and normalization of credit costs. Despite macro headwinds stemming from the onset of the second wave of the pandemic, we see limited speedbumps in ICICI Bank's journey towards high growth and superior profitability. Maintain BUY with revised SOTP price of INR649.

Shares of ICICI BANK LTD. was last trading in BSE at Rs.590.75 as compared to the previous close of Rs. 570.05. The total number of shares traded during the day was 3104237 in over 57868 trades.

The stock hit an intraday high of Rs. 604.9 and intraday low of 587.75. The net turnover during the day was Rs. 1851428972.

Source : Equity Bulls

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