Buy ICICI Bank; target of Rs 1550: Sharekhan

Sharekhan's research report on ICICI Bank

Loan growth to outpace system growth despite growth moderation in unsecured retail loans in H2FY2025, led by business banking and corporate segments. LDR is at a comfortable level (c. at ~85%) and focus remains on balancing incremental loan growth with incremental deposit mobilisation. NIMs are expected to be stable in H2FY2025 vs. H1 until the rate cut cycle starts. Stress in the unsecured retail segment is expected to stabilise over the next couple of quarters. The bank is still confident that normalisation of credit costs will be gradual, keeping credit cost still far lower than the long-term averages as portfolio risk is still within internal limits despite increased delinquencies in unsecured retail. Stable return ratios, strong liability franchise, and steady growth should help the bank to sustain premium valuation to its peers. The stock trades at 2.6x/2.2x/1.9x its FY2025E/FY2026E/ FY2027E core BV estimates.

Outlook

We reiterate our BUY rating with a revised PT of Rs. 1,550. The bank is relatively well-positioned in the current cycle as it continues to outperform peers on most of the parameters exhibiting strong franchise strength despite sectoral headwinds.