Buy ICICI Bank Ltd For Target Rs.1,037 - LKP Securities
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Result and Price Analysis:
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
Gazing the Core:
Asset quality improved further, restructuring book eased:
Slippages were down at ₹42bn v/s ₹40bn in the previous quarter. Retail slippages and Corporate & SME slippages contributed 89%, and 11% respectively. Despite significant contribution, retail slippages down 3% sequentially. The standard restructured (0.96% of portfolio) book inched down sequentially at ₹83bn. Retail book contributed 74% of restructured pool (Over 95% are secured), while rest is from corporate and SME book. The bank carries provision worth ₹25bn (~30% covered) against the restructured pool. The absolute GNPA decreased by 9% sequentially led by flat slippages and higher upgrades. As on 4QFY22, the bank’s GNPA/ NNPA/PCR stood at 3.6%/0.76%/79% against 4.13%/0.85%/80% in the previous quarter
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