Is ICICI Bank a new trendsetter in banking stocks after a ‘great’ quarter? | Techy Kings


Private lender ICICI Bank is just a few rupees away from breaking its 1-year high on the stock market. During Muhurat trading, ICICI Bank saw strong buying on the back of an eye-catching set of numbers in the second quarter of FY23. The bank was among the best in the banking basket on Monday. In Q2Y23, the bank beat estimates with double-digit growth in profit and interest income, while margins remained healthier and asset quality improved. Analysts have assigned a ‘buy’ rating on the bank with a price target starting from 1,000 to 1,135 per person.

When trading in the market was allowed from 6.15 pm to 7.15 pm on Monday, investors were quick to add ICICI Bank shares to their portfolios. Shares rose almost 3% in just one hour. It hit a daily high 932.90 each which is just a few rupees from the 52-week high 936.35 each.

Stock closes approx 925.90 each up 18.75 or 2.07% on BSE. Its market capitalization is more than 6.45 lakh crore.

ICICI Bank remains among the top five performers in the Sensex and Nifty 50, while it is the best in banking.

The reason behind the stellar buy was a stunning set of figures posted by the bank in Q2 FY23.

In the quarter of July to September 2022, ICICI Bank recorded a net profit of 7,558 crore in Q2FY23 up by 37% from 5,511 crore in the same quarter last year. Net interest income (NII) jumped by 26% yoy to 14,787 crore in Q2FY23 as compared 11,690 crore in Q2 FY22. Also, net interest margin came in at 4.31% during the quarter.

Further, the bank’s asset quality improved with gross NPA reaching 3.19% in Q2FY23 compared to 3.41% in Q1FY23 and 4.82% in Q2FY22. Net NPA ratio improved to 0.61% in Q2FY23 compared to 0.70% in Q1FY23 and 0.99% in Q2FY22.

As of September 30, 2022, bank deposits jumped 12% yoy to 1,090,008 crore, while advances zoomed by 23% yoy to 938,563 crore.

Should you buy ICICI Bank shares?

In a report, Manish Agarwalla and Sujal Kumar Research Analyst at Phillip Capital said, “ICICI bank reported another strong and stable financial performance, with NIM positively surprising. The improvement in unit-level profitability was driven by margin improvement; higher acquisition/service costs lower and better credit behavior has resulted in market share gains for the bank. We believe ICICIBC is best positioned among peer banks given its strong digital capability to underwrite loans at an accelerated rate. With a strong balance sheet and capital position , the bank aims to capitalize on growth opportunities in the system.”

The duo’s notes added, “We expect continued improvement in return on risk-weighted assets for the bank, and is poised to be the highest in the industry by FY23. We expect earnings growth of +24%/20% in FY23e/ 24e translated into RoA by 2%/2.1%. At CMP, ICICIBC trades at 2.9x/2.4x FY23e/24e ABVPS ​​core from 265/307 (assessing subsidiaries in 175). We maintain Buy with a revised TP of as much 1080 (Rs1070 earlier).”

Meanwhile, in a report, Research Analyst Raj Jha at Edelweiss Financial Services said, “ICICI Bank (ICICI) reported a stunning set of numbers with NIM for the quarter being the highest in at least a decade and RoA for the quarter being the second highest since at least 2007. YoY credit growth is also the highest in at least 12 years. Asset quality continues to improve, with a QoQ moderation in declines reported by banks.”

Jha added, “We expect the bank to report consistent mid-to-high junior credit growth and project RoA and RoE of 2% and 16%, respectively, in FY24E. We believe the bank’s stock will continue to undergo re-rating and maintain our BUY recommendation with Revised TP from 1,135/share.”

Further, analyst Ajit Kumar Kabi at LKP Securities in a report said, “We expect its loan book to grow at a CAGR of 20% over FY22-24E, led by technology initiatives. Credit cost normalization is underway. We estimate a ROA /ROE return ratio of 1.8% and 15% in FY23E. We value the standalone entity with 3xFY24E BVPS ( 320) and investments in subsidiaries and JVs ( 138 per share); we arrive at a target price of 1,097. We recommend BUY with a potential upside of 21%.

So far in the current year, ICICI Bank shares have soared over 21% on Dalal Road.

Disclaimer: The views and recommendations made above are the views of individual analysts or brokerage firms, and not of Mint.

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