Buy ICICI Bank; target of Rs 971: Arihant Capital

Arihant Capital's research report on ICICI Bank

ICICI Bank reported profit of INR 6,905 cr (+50% YoY/-1.6% QoQ) was higher than our estimate of INR 6,407 cr, driven by better operating profit growth and 60% YoY decline in provisions. NII for the quarter grew strongly by 21% YoY/5% QoQ to INR 13,210 cr, led by strong advances growth of 21% YoY/4% QoQ. NIM of the bank was stable at 4% QoQ. Operating profit increased by 16% YoY/0.2% QoQ to INR 10,309 cr, driven by better performance on other income and NII front. Other income for the quarter grew by 17% YoY to INR 4,665 cr. Despite a sharp rise in bond yield, Bank has reported treasury gain of INR 36 cr as compared to gain of INR 290 cr in Q1FY22. Asset quality of the bank improved further with GNPA declined by 19bps QoQ at 3.4% and NNPA decreased by 6bps QoQ at 0.7% led by strong recoveries & upgrades. Restructuring pool of the bank declined by 11% QoQ to INR 7,376 cr or 82bps of loans. Bank has made additional contingent provision of INR 1,050 cr during the quarter and holds provision buffer of INR 8,500 cr (0.95% of advances) which provides comfort over balance sheet position.

Outlook

We continue to maintain our positive stance on the stock led by its leveraging digital capabilities, gaining market share position, granular liability franchise and improving return ratios. We maintain our Buy rating on the stock with SOTP based target price of INR 971, based on 2.6x FY24E P/ABV for standalone bank and INR 161 for subsidiaries.