IGI Logo

Strengthening its leadership with a best-in-class performance

Marching ahead on its journey from bank to bank tech

* ICICIBC’s Annual Report reaffirms our view that the bank is progressing well in its endeavor to strengthen its Balance Sheet, with a strong focus on the Retail franchise.

* While the Retail portfolio has been leading the overall loan growth, the SME and Business Banking portfolio grew 39% YoY in FY22 and constitutes 11% of total loans. Growth has been driven by InstaBIZ and Merchant Stack tools, which have improved operational efficiency and removed bottlenecks.

* The bank has one of the highest proportions of Retail deposits, with a strong CASA mix. Savings accounts per branch improved to INR664m in FY22 v/s INR461m in FY20, indicating higher productivity at the branch level. This has aided the 59bp YoY decline in the cost of deposits to 3.5% in FY22.

* The concentration of the top 20 advances/exposures improved by 193bp/244bp to 11.8%/12% in FY22. On the liability side, concentration of the top 20 depositors improved further by ~12bp to 5.3%.

* GNPAs improved aided by controlled slippages and healthy recoveries, and effective monitoring systems. We expect GNPA/NNPA to moderate to 2.4%/ 0.5% by FY24 and credit cost to undershoot its long-term trends.

* With asset quality holding strong, loan growth getting broad-based, and margin likely to improve, aided by the recent RBI rate hikes, we estimate RoA/RoE to improve to 2.1%/17.1% by FY24. We maintain our Buy rating with a SoTP-based TP of INR1,050 (2.8x FY24E ABV). ICICIBC remains our preferred play in the sector.

Building a granular Retail franchise, aided by superior digitization

The bank continues to see a strong growth in Retail deposits and has successfully maintained a robust liability franchise. Total deposits/CASA clocked ~17%/~16% CAGR over FY17-22. CASA ratio remains healthy at 48.7% in FY22. The growth in its deposit franchise was supported by continuous efforts to strengthen its digital platforms and simplification of processes to provide a seamless banking experience to customers. While its liability franchise stands strong, the management intends to maintain a healthy and stable funding profile to deliver benefits on the cost of funds. The access to quality and granular low cost deposits has helped ICICIBC maintain its competitive advantage in the cost of funds over its peers.

Retail segment leads loan growth; the mix of SME and Business Banking rises to ~11

ICICIBC grew its business by focusing on granularity, and saw healthy growth across Retail, SME, and Business Banking portfolios. This is underpinned by a focus on risk and reward, with a return of capital v/s a return on capital and avoidance of lumpy provisions. The bank has increased its focus on higher yielding Retail loans like Personal loans and Credit Cards. The share of Unsecured Retail loans rose to 10.2% of the total loan book from 5.9% in FY18. Around 75% of loans in this portfolio are to its existing customers, with an affinity towards the Salaried segment. SME and Business Banking growth will continue to be driven by digital offerings and platforms such as InstaBIZ and Merchant Stack. ICICIBC had adopted data analytics driven onboarding, credit assessment, and monitoring of these customers.

To Read Complete Report & Disclaimer Click Here

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html SEBI Registration number is INH000000412

Above views are of the author and not of the website kindly read disclaimer