Another steady quarter for ICICI Bank; brokerages bullish on strong deposit growth, asset quality
Brokerages believe that the bank is poised for re-rating ahead, given its strong deposit growth, healthy asset quality, and attractive valuations.
Overall, given the far better margins, higher ROA, and a relatively higher earnings growth, ICICI Bank’s valuation premium to HDFC Bank can expand in the near term
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ICICI Bank shares surged over 2 percent to Rs 1,131 per share on April 29 after the lender reported a steady show in the January-March quarter (fourth quarter FY24). Brokerages believe that the bank is poised for re-rating ahead, given its strong deposit growth, healthy asset quality, and attractive valuations.
JP Morgan analysts shared an ‘overweight’ rating on ICICI Bank with a target price of Rs 1,300 per share, saying that the lender’s growth is meaningfully ahead of large-cap peers. “We see scope for upward re-rating given better growth. Since valuations are reasonable at 13x FY26, we upgrade FY25/26 EPS by 4 percent each,” they said.
Nomura too expects ICICI Bank to deliver a 13 percent profit-after-tax (PAT) compounded annual growth rate (CAGR) over FY24-26 after reporting another strong quarter. The brokerage firm shared a ‘buy’ call with a target price of Rs 1,335 per share.
ICICI Bank’s net profit rose by 17.4 percent on-year to Rs 10,708 crore in the fourth quarter FY24, while net interest income (NII) climbed by 8.1 percent YoY to Rs 17,667 crore.
ALSO READ: ICICI Bank Q4 results: Top highlights from earnings report
Low credit costs limited ICICI Bank’s margin pressure in Q4
However, its net interest margin (NIM) slipped to 4.4 percent in the fourth quarter of FY24 as against 4.9 percent in the year-ago period. Sequentially, the NIM was at 4.43 percent in the third quarter of FY24.
Despite margin drag seen in the March quarter, analysts at Bernstein believe that the pressure was limited due to ultra-low credit costs. The brokerage firm shared a ‘market perform’ rating on ICICI Bank, with a target price of Rs 1,150 per share.
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Sandeep Batra, Executive Director of ICICI Bank guided margins to be in a rangebound direction, going ahead, unless there is a change in repo rates. They expect the Reserve Bank of India (RBI) to start shallow rate cuts soon, he added in ICICI Bank’s post-earnings concall.
ICICI Bank’s deposit growth, improving asset quality in Q4 are key positives
A positive highlight in ICICI Bank’s fourth quarter scorecard was its strong deposit traction. Deposits grew by 20 percent YoY or 6 percent QoQ to Rs 14.13 lakh crore in the fourth quarter of FY24, outpacing credit growth of 16 percent YoY or 3 percent QoQ at Rs 11.84 lakh crore in the same period.
ICICI Bank’s asset-quality picture was healthy as well in the fourth quarter, with gross non-performing assets declining by 14 basis points (bps) YoY to 2.16 percent in the fourth quarter of FY24, whereas net NPA slipped 2 bps YoY to 0.42 percent in the same period.
ALSO READ: ICICI Bank Board declares dividend of Rs 10 per share for FY24
Apart from that, the lender maintained healthy return on asset (RoA) at 2.36 percent in FY24, justifying its premium valuation against peers, said analysts at Bernstein.
ICICI Bank’s RoA grew to 2.36 percent in FY24 from 2.2 percent in FY23. Emkay analysts believe the bank will deliver higher RoA over FY25-26E at 2.1-2.3 percent, on the back of healthy margins.
“ICICI Bank remains our preferred pick in the banking space, given its superior returns profile, top-management credibility, and strong capital or provision buffers. We retain ‘buy’ rating on the stock, with a target price of Rs 1,450/share,” they added.
So far this year, the stock of India’s second largest private lender has surged over 11 percent, outperforming 3 percent gain in the benchmark Nifty 50 index.
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