LKP Research has given Buy recommendation for ICICI Bank with a target price of Rs. 1037 in its research report issued on Apr 25, 2022

LKP Research’s research report on ICICI Bank

Earnings in 4QFY22 re-acknowledge our conviction that ICICI Bank is preparing for sustainable and prudent growth led by tech-driven initiatives and normalization in credit cost. The bank has reported its 4QFY22 results with the key pointers being: 1) Strong NII growth of 21% YoY, with headline NIMs (Domestic: 4.1% & Overall: 4%) stable sequentially despite higher liquidity available (LCR: 130%). 2) PPoP growth of 1.4% sequentially driven by stable core fee income, 3) Reported slippages (₹42bn) slightly higher sequentially, 4) NNPA ratio improved further at 0.76%, 5) PCR (excluding technical write-offs) stood at 79%. The Bank made ₹10bn of additional contingent provision. However the bank didn’t include covid & floating provision (~₹180bn) in PCR calculation; 7) Contingent provision (excluding PCR) stood at 2.1% of the loan book, 8) BB & below exposure down sequentially to 1.3% of net advances, 9) the bank’s net advances grew by 17.1% YoY and 5.5% sequentially; and 8) deposits stood at ₹10.6tn mark and grew by 5% QoQ with 30bps improvement in average CASA at 45.2%. Moreover, provision expenses inched down sequentially to ₹11bn v/s 20bn in 3QFY22. Factoring stable balance sheet growth and credit cost of 1% in FY23E, we estimate the bank’s FY23E ROA and ROE of 1.8% and 15% 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 1.8% and 15% in FY23E. We value the standalone entity at 3.3xFY23E BVPS (₹273) and investment in subsidiaries and JVs (₹138 per share); we arrive at a revised target price of ₹1037. We recommend BUY.

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