ICICI Bank share price hits record high; analysts say Rs 600 is imminent

While having an outperform call on the stock with a target price of Rs 615 (implying 16 percent potential upside from current levels), Macquarie said both retail and corporate asset quality were fine and provisions should be contained to 20-25 percent of operating profits.

"ICICI Bank is our top pick in the sector," it added.

In a recent analyst day, the country's largest private sector lender highlighted the progress that its different businesses are making and how well it is positioned to capitalize on the exciting opportunities in financial services.

The topics of discussion ranged around (a) management's efforts to build a strong bank with best-in-class digital capabilities, (b) the usage of technology to accelerate growth across business verticals and maintain healthy operating metrics, (c) collaboration with start-ups to offer improved customer proposition, penetrate newer markets and reduce operating costs, and (d) maximizing the risk calibrated core operating profit as it follows 'One Bank One RoE' approach.

ICICI Bank has historically been a technology-savvy bank with several innovations to its credit. However, asset quality challenges over the past few years have taken the centre stage and many digital capabilities were not getting duly appreciated.

"Over the past few years, the bank has been reporting strong growth in retail advances, supported by an impressive share of digital originations across key product lines. It has in fact built one of the highest provisioning coverage in the banking sector. With asset quality issues getting sorted, bank appears firmly positioned to deliver healthy sustainable growth, led by continued investments in technology and further expansion in digital offerings," said Motilal Oswal.

Hence, ICICI Bank remained one of its top ideas in the BFSI space, said the brokerage which estimates a return on asset (RoA)/RoE of 1.6 percent/15.7 percent in FY21.

It reiterated its buy call on the stock with a revised SOTP-based target price of Rs 625, implying 18 percent potential upside from current levels.

Prabhudas Lilladher also has a buy call on the stock with a new target of Rs 605 (revised from Rs 541 earlier).

"Delta from asset quality improvement, a high cushion of PCR and improving profitability has played out on valuation multiples from 1.3x to 2.0x within the last two years. Hence, we believe next leg of valuation rise will be based on sustained return ratios delivery and scale up of business segments where bank's market share is lower which could very well be bridged by improved digital penetration," said the brokerage.

"We have been witnessing some of the initiatives play out in the past couple of quarters with an improved market share in retail and re-oriented corporate lending towards granular lending. This has helped to come back on track towards the target RoEs of 15 percent by June FY21 (guidance unchanged) led by a strong improvement in bank's core operations. Hence, we maintain buy," it added.

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