Buy ICICI Bank; target of Rs 1200: Sharekhan

Sharekhan's research report on ICICI Bank

ICICI Bank reported yet another strong quarter with earnings rising by 40% y-o-y with RoA sustaining at ~2.4%. Higher other income and lower credit cost helped to sustain the current RoA trajectory despite NIMs compression and higher opex growth. Headline asset quality stayed stable q-o-q with GNPA/NNPA ratio at 2.76%/0.48% although slippages ratio was higher at 2.4% versus 2.0% q-o-q (cal. as % of 12-month trailing loans) due to higher slippages in kisan credit card portfolio but slippages remained lower on y-o-y basis. Contingent provision buffer stood at ~1.2% of loans. Deposit growth picked up strongly and outpaced loan growth. Loan growth remained healthy and was broad-based, up 18% y-o-y/ 4% q-o-q. Total deposits grew by 18% y-o-y / 5% q-o-q, driven by term deposits (up 26% y-o-y/ 10% q-o-q). CASA balances were down 1% q-o-q.

Outlook

We maintain a Buy rating with a revised PT of Rs. 1,200. From here on, only operating leverage can help to sustain current RoA, which could be partly offset by moderation in NIMs and normalisation of credit cost. Further re-rating from here on is likely to be a very gradual one based on sustainable performance and quality earnings. Stock currently trades at 2.6x/2.2x its FY2024E/FY2025E core BV estimates.