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Below are Views On ICICI Bank Q3FY21 results By Rajiv Mehta, Yes Securities

ICICI Bank Q3 FY21: Strong growth and resilient asset quality leading to 5-6% ABV upgrades

Retain BUY and raise 12m TP to Rs675

The stand-out highlights of ICICBC’s Q3 FY21 performance were a sharp uptick in loan growth, firm NIM despite higher interest reversals, and lesser-than-expected deterioration in asset quality causing lower provisioning. Even in the current challenging quarter (not so supportive growth and delinquency environment), the bank delivered 1.6% RoA and 15% RoE on computed basis. The significant loan growth was driven by mortgages (up 7% qoq), auto loans (up 7% qoq), business banking (up 12% qoq) and domestic corporate lending (up 8% qoq). The stock of proforma slippages at Rs82bn (120 bps of adv.) and invoked restructuring at Rs25bn (36 bps of adv.) were below our expectations, and highlights the strength of the balance sheet. The bank carries significantly higher-than-regulatory provisions on these pools, and a Covid-related buffer of 0.9% of advances which cushions the P&L from incremental pandemic-driven slippages. In addition, the normalizing overdue trends across segments underpins Management’s confidence about a normal credit cost of 1.2-1.3% in FY22.

Our earnings and ABV estimates for FY22/23 undergo material upgrade, as we raised loan growth assumption and pruned credit cost forecast. We now expect the bank to deliver average 1.7% RoA and 14-15% RoE over FY22-23 with high capitalization levels. The core bank trades at 1.6x FY23 P/ABV, attractive in a scenario of improving growth and strong profitability. Retain BUY and raise 12m PT to Rs675, as we also assign a better multiple now. 

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