MOSL recommends a Buy on ICICI Bank over focus on profitable growth, target Rs 1,550

FILE PHOTO: A bird flies past the facade of the ICICI bank head office in Mumbai, India, April 21, 2023. REUTERS/Francis Mascarenhas/File Photo

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

Motilal Oswal is recommending a Buy on private lender ICICI Bank with a target price of Rs 1550, implying a 17% upside, citing robust loan growth and its focus on profitable growth.

The brokerage said the bank, which is its top pick in the sector, has seen healthy loan growth and strong asset quality, along with industry-leading return ratios.

"While we anticipate margins to remain in pressure in the near term due to a potential rate cut and rising costs of funds, the bank's operating leverage is emerging as a key driver of earnings growth," MOSL said in its note on December 12.

"With robust deposit inflows and a favourable CD ratio — the lowest among large private banks — ICICI Bank is well-positioned for profitable growth," it added. The bank's balance sheet is primarily funded by retail deposits.

Motilal Oswal said the bank expects margins to remain 'broadly stable' but a turn in the rate cycle will 'dent' margins as around 51% of the loan book is linked to repo. MOSL estimates margins to moderate further by around 20 bps during FY26E to 4.2% from 4.4% this fiscal, and it remains watchful of a possibility of a 75-100 bps repo rate cut in CY25, higher than previously estimated.

Motilal Oswal expects the bank to record a CAGR of 12% in PAT over FY25-27E, leading to RoA/RoE of 2.1%/16.7% in FY27.

The lender has made 'significant progress' in improving its asset quality, and now maintains a best-in-class PCR of around 79% with contingent provisions at 1% of loans, improving its credit cost outlook. The bank is now focusing on leveraging technology to increase volumes in retail as well as commercial banking, aiming to improve productivity.

Motilal Oswal said overleveraging in the unsecured lending segments remains a concern for the sector, and the ongoing unwinding may take a few more quarters, putting pressure on growth.