ICICI Bank top Nifty gainer as steady Q2 impresses brokerages, see up to 28% upside potential

CLSA gave an 'outperform' rating with the highest target price of Rs 1,600 per share

Brokerages expressed enthusiasm over ICICI Bank's robust performance in the July-September quarter (Q2FY25), issuing multiple 'buy' calls and raising target prices. Analysts foresee up to 28 percent upside from current levels, as the bank's steady results reinforced its leadership among private sector peers.

Motilal Oswal retained its 'buy' rating on ICICI Bank, setting a target price of Rs 1,500 per share. The brokerage raised the bank’s EPS estimates by 2.8 percent for FY25 and 1.8 percent for FY26, projecting a return on assets (RoA) of 2.19 percent and return on equity (RoE) of 17.4 percent by FY26.

Similarly, CLSA gave an 'outperform' rating with the highest target price of Rs 1,600 per share, lauding the bank’s superior asset provisioning compared to competitors.

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"ICICI Bank posted another solid quarter, with mid-teen growth in the balance sheet and a slight moderation in margins by 5-10 basis points sequentially. Although NII is expected to stabilise over the year, gross non-performing loans (NPL) remained steady, and credit costs were well-controlled. These factors position ICICI Bank and HDFC Bank as standout performers among private lenders," CLSA noted.

Nomura also raised its target price to Rs 1,575 per share, reiterating its 'buy' call. The brokerage highlighted ICICI Bank's exceptional performance, citing strong loan and deposit growth in Q2, along with solid asset quality. It also revised EPS estimates upward by 2-3 percent for FY25-27.

ICICI Bank's Q2 net profit rose 14.5 percent year-on-year to Rs 11,746 crore, surpassing market expectations. Net interest income (NII) increased by 9.5 percent YoY to Rs 20,048 crore, reflecting healthy growth, although net interest margins (NIM) declined by 26 basis points to 4.27 percent.

Despite the margin compression, the bank’s management remains optimistic, believing that the worst of the margin pressure is over. They expect minimal further erosion, as deposit rate hikes have largely stabilised. Retail deposit rates surged mainly during the second half of FY23 and FY24, but the bank anticipates no significant increases going forward.

In terms of asset quality, ICICI Bank continued to outperform, with its gross non-performing asset (GNPA) ratio improving to 1.97 percent as of September 30, 2024, down from 2.15 percent in the previous quarter. The net NPA ratio held steady at 0.42 percent, reflecting tight control over slippages.

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