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Robust at the core; Reiterate BUY  

ICICI Bank’s stronger‐than‐expected core PPOP growth performance (22% yoy v/s avg. 18% yoy in preceding 5 quarters) highlights a) structural growth capabilities in chosen products across segments, b) pricing power on both sides of the balance sheet and c) improving revenue and cost productivity. Growth propellers remain safer and secured products like Home Loans (up 8% qoq /22% yoy), high‐rated corporate loans and SME/Business Banking loans; and the traction continues to come along with margin and capital efficiency. The bank endures to utilize a portion of core PPOP for cushioning the future through creation of addition/contingency provisions.

The resilient portfolio performance (mild NPA addition & restructuring in Covid 1st phase) reflects robust underwriting and portfolio selection; along with a strong balance sheet (comforting capital, NPL coverage and additional buffer) should assuage concerns on the impact of the second pandemic wave. The 0‐90 overdue portfolio in retail and SME segments stands near the pre‐Covid level. In most likelihood, the credit cost in FY22 may not be significantly higher than the normalized range of 1.2‐1.3%. We estimate material RoA expansion over FY21‐24 and a 20%+ earnings CAGR. The core bank trades at 1.7x FY23 P/ABV. We retain BUY and 12m PT of Rs675.   

Conference call highlights

* Slippages were 55bn in Q4 (annualized delinquency ratio of 3%)  ‐  Retail slippages were Rs44bn and Corporate & SME at slippages at Rs12bn (Rs11bn downgrade from BB & Below).

* NPA addition and restructuring due to Covid was much lower than bank’s expectation  ‐  Superior portfolio performance reflects robustness of underwriting and portfolio selection.

* Strength of the balance sheet provide comfort to the Management ‐ Robust capital, portfolio, NPL coverage and additional Covid buffer.

* Loans under various resolution/restructuring Rs40bn (0.5% of loans)  ‐  of which, Rs20bn in Retail – Rs7‐8bn provisions held on restructured book, way higher than regulatory requirement.

* 0‐90 overdue portfolio in Retail was marginally higher than pre‐Covid level ‐  it was 1.5% and 4% higher as of Dec and Sept respectively

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