Buy ICICI Bank; target of Rs 1450: Emkay Global Financial

Emkay Global Financial's research report on ICICI Bank

ICICI Bank posted largely in-line PAT at Rs107bn/2.4% RoA in 4Q, mainly led by healthy margins and contained provisions, and partly offset by a one-off treasury hit due to treasury loss of Rs2.8bn (TRF of negative balance of Rs3.4bn in foreign currency reserve due to closure of the Mumbai unit). For FY24, Bank reported superior RoA at 2.3% vs 2.2% in FY23. Credit growth moderated a bit, to 16% YoY/3% QoQ, but retail loan growth was strong at 19% YoY/4% QoQ and now constitutes 55% of the overall book. This, coupled with sharp jump in CASA ratio (400bps QoQ), aided margins (down only 3bps QoQ to 4.4%). Headline GNPA/NNPA ratio has moderated to a low of 2.2%/0.4%, while Bank holds the peer-best specific PCR at 81% and contingent buffer at 1.1% of loans, which should keep LLP contained and thus support RoA. ICICIB remains our preferred pick in the banking space, given its superior returns profile (RoA: >2%), top-management credibility, and strong capital/provision buffers.

Outlook

We retain BUY on ICICIB, with revised TP of Rs1,450/sh, valuing the bank at 2.9x FY26E ABV (premium over HDFCB @2.5x) and subsidiaries at Rs200/sh.

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