Buy ICICI Bank; target of Rs 1650: Motilal Oswal

Motilal Oswal's research report on ICICI Bank

ICICI Bank has done it again! Seldom does a bank of the size of ICICI Bank (ICICIBC) surprise with its operating performance the way this bank has done, that too amid a volatile macro environment, elevated competition for deposits, and ongoing normalization in asset quality. ICICIBC had earlier delivered earnings beats despite making large contingent provisions, though it was in a benign operating environment compared to what is prevailing currently. Our estimate of a modest NIM expansion in 4Q was not easy to achieve given the ongoing rate-cut cycle, but delivering a 16bp NIM expansion, which has covered the margin fall over the entire year and taken NIMs back to the level seen in 4QFY24, was indeed very commendable.

Outlook

We upgrade our earnings estimates by 2.5%/4.2% for FY26/FY27 on the back of positive NIM surprise and controlled credit costs. We thus estimate RoA/RoE of 2.3%/17.5% in FY27. ICICIBC remains our preferred BUY in the sector with a revised TP of INR1,650 (2.7x FY27E ABV).