Buy ICICI Bank; target of Rs 1900: Religare Capital

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26 Aug, 2025 12:21

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Religare Capital`s research report on ICICI BankRetail/international books drive growth; NIMs up 2bps QoQ: Overall advances growth was healthy (+13.8% YoY) and led by the retail and international segments (fig 4). Management expects the bank to grow 2-4% above the industry in FY15, with a focus on retail loans (to grow >20% YoY). Traction in SA deposits was healthy (+2.8% QoQ), which coupled with a robust 15.5% QoQ growth in CA deposits led to a 70bps QoQ expansion in the terminal CASA to 43.7% (Fig 5). Global NIMs improved 2bps QoQ to 3.42%, well supported by a 4bps QoQ increase in domestic NIMs (to 3.84%). For FY15, the bank has guided to maintain NIMs at 3.3–3.4%. Asset quality pressure persists: Slippages were higher at 16.7bn (2.1% of loans), of which 50% were contributed by the restructured book. Fresh restructuring was lower at Rs 8.3bn and management indicated a pipeline of Rs 18bn. ICICIBC marginally raised its credit cost guidance to 90bps–95bps of average loans from 90bps earlier. The bank provided Rs 300mn as provisions for unhedged foreign currency exposure, which pushed up credit costs by 3bps (to 96bps for Q2FY15). Retail fee drives fee income growth: Fee income growth was sluggish at 5.5% YoY due to a slowdown in corporate-based fee income and forex gains, even as retail fees contributed about 60% of overall fee income. Overall other income was up 26.4% YoY on account of Rs 1.65bn of gains on repatriation of retained earnings and dividends from subsidiaries. The bank has also provided for a deferred tax liability of Rs 880mn in Q2FY15. "ICICIBC reported a decent Q2FY15 with high retail asset growth (+25.2% YoY), a 2bps QoQ uptick in NIMs (to 3.42%) and better operating efficiency. While slippages were higher QoQ, incremental stressed asset formation at 3.1% (vs. 3.34%) was sequentially lower. Continued retail traction coupled with operating efficiency should likely aid RoE expansion to 16% by FY17. We believe valuations at 1.8x FY17E ABV/10x FY17E EPS (adj. for sub valuation) are reasonable in the backdrop of rising RoEs. Maintain BUY,” says Religare Capital research report.   

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