Buy ICICI Bank; target of Rs 1028: LKP Research

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26 Aug, 2025 12:21

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LKP Research's research report on ICICI Bank

Earnings in 3QFY23 re-acknowledge our conviction that ICICI Bank is maintaining a sustainable and prudent growth led by tech-driven initiatives. The bank has reported its 3QFY23 results and the key pointers are: 1) Strong NII growth of 34.6% YoY, with headline NIMs (Domestic: 4.79% & Overall: 4.65%) up sequentially led by higher proportion of EBLR loans. 2) PPoP growth higher sequentially driven by healthy NII and lower C/I (38.2%), 3) Reported slippages (₹57bn v/s ₹44bn in 2QFY23) increased sequentially, 4) NNPA ratio improved further at 0.55%, 5) PCR (excluding technical write-offs) stood at 82.6%. The Bank made ₹15bn of additional contingent provision. However the bank didn’t include contingent & floating provision (~₹213bn) in PCR calculation; 7) Contingent provision (excluding PCR) stood at 2.2% of the loan book, 8) BB & below exposure down sequentially to 1.2% of net advances, 9) the bank’s net advances grew by 19.7% YoY and 3.8% sequentially; and 8) deposits stood at ₹11.2tn mark and grew sequentially by 2.9% with average CASA at 44.6%. Moreover, provision expenses inched up sequentially to ₹22.6bn v/s 16.4bn in 2QFY23. Factoring stable balance sheet growth and credit cost of below 1% in FY24E, we estimate the bank’s FY23E ROA and ROE of 2.1% and 16.6% respectively. We have positive outlook on the bank with BUY rating.

Outlook

We expect its loan book to grow at CAGR of 20% over FY22-24E, led by technology initiatives. The credit cost normalization is underway. We estimate return ratio ROA/ROE of 2.1% and 16.6% in FY24E. We value the standalone entity at 2.7xFY24E BVPS (₹336) and investment in subsidiaries and JVs (₹122 per share); we arrive at a target price of ₹1,028. We recommend BUY with a potential upside of 18%.

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ICICI Bank - 23 -01-2023 - lkp