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Result and Price Analysis

Earnings in 4QFY23 re-acknowledge our conviction that ICICI Bank is maintaining a sustainable and prudent growth led by tech-driven initiatives. The bank has reported its 4QFY23 results with the key pointers being: 1) Strong NII growth of 40.2% YoY, with headline NIMs (Domestic: 5.02% & Overall: 4.90%) up sequentially led by higher proportion of EBLR loans. 2) PPoP growth higher sequentially driven by healthy NII and stable C/I (39.2%), 3) Reported slippages (?43bn v/s ?57bn in 3QFY23) decreased sequentially, 4) NNPA ratio improved further at 0.48%, 5) PCR (excluding technical write-offs) stood at 82.8%. However the bank didn’t include contingent & floating provision (~?226bn) in PCR calculation; 7) Contingent provision (excluding PCR) stood at 2.22% of the loan book, 8) BB & below exposure down sequentially to 0.8% of net advances, 9) the bank’s net advances grew by 18.7% YoY and 4.7% sequentially; and 8) deposits stood at ?11.8tn mark and grew sequentially by 5.2% with average CASA at 43.6%. Moreover, provision expenses inched up sequentially to ?16.2bn v/s 22.6bn in 3QFY23. Factoring stable balance sheet growth and credit cost of below 1% in FY24E, we estimate the bank’s FY23E ROA and ROE of 2.1% and 16.8% respectively. We have positive outlook on the bank with BUY rating.

Lower slippages keep asset quality intact, restructuring book eased: Slippages were down meaningfully to ?43bn v/s ?57bn in the previous quarter. Retail slippages and Corporate & SME slippages contributed 94% and 6% respectively. Despite significant contribution, retail slippages decreased by 3% sequentially. The standard restructured (0.44% of portfolio) book inched down sequentially to ~?45bn. Retail book contributed ~85% of restructured pool (Over 95% are secured), while rest is from corporate and SME book. The bank carries provision worth ?13.8bn (~31% covered) against the restructured pool. The absolute GNPA decreased by 4.1% sequentially led by lower slippages and higher upgrades. As on 4QFY23, the bank’s GNPA/NNPA/PCR stood at 2.81%/0.48%/83% against 3.07%/0.55%/82% in the previous quarter. The bank witnessed meaningful reduction in GNPA ratio as well as the NNPA. With stable stress level, the total provisioning expenses were down sequentially and stood at ?16.2bn v/s ?22.6bn in the previous quarter

The total contingent provisioning stood ?131bn. The total additional provision contain contingent provision (?131bn), General Provision (?62bn) and Provision on Non-fund based NPA (?20bn). The PCR including all provisions (Cumulative + General + Contingencies) stood at 156% of GNPL. The contingent provision (excluding PCR) stood 2.22% of the loan. The management expects the contingent provision to be adequate for future stress. The bank’s BB & below rated pool came down (?81.6bn v/s ?117bn) contributes 0.8% of total customer asset

Interest rate tailwind continues to benefit: The bank’s quarterly NII stood at ?176bn; grew by 40.2% YoY and 7.3% sequentially driven by improved domestic NIMs at 5%. Overall NIMs up by 25bps to 4.9%. The bank’s 30% loans are fixed and remaining linked with external benchmark. Non – interest income grew by 7.4% YoY and 1.3% QoQ. The PPOP stood at ?138.3bn; 34.3% YoY driven by healthy NII and stable C/I ratio of 39.2%. With sequentially lower provisioning expenses (?16.2bn v/s ?22.6bn) the bank reported PAT of ?91.3bn; grew 30% YoY and 9.7% sequentially. The banks ROA/ROE stood at 2.4%/19%.

Growth maintained: Disbursement across retail products seen stable growth. The bank’s advances stood at ~?10.2tn; 18.7% YoY and 4.7% QoQ. Domestic advances grew 20.5% YoY. Domestic advances (96.7% contribution) grew by 5% QoQ. Foreign advances de-grew by 3.3% QoQ. Retail advances (70.4% contribution) grew by 5.6% QOQ. SME advances (4.7% contribution) grew by 6.2% QoQ. Corporate advances (23% contribution) grew by 3.8% QoQ. In retail book; Personal loan & Credit card segment (17.5% of retail book) grew at 9% sequentially. 85% of the unsecured retail book customers are salaried. Home loan (48% of retail book) grew by 4% QoQ while Vehicle loan (11.1% of retail book) grew by 4.9% QoQ. The bank’s deposit stood at ?11.8tn mark and grew by 10.9% YoY and grew by 5.2% sequentially. The CDR and Avg. CASA stood at 86.4% and 43.6% respectively. In 4QFY23, the bank’s CET 1 stood at 17.1%. The bank’s CAR stood at 18.34% with Tier 1 of 17.6%. The total RWA stood 67.6% of total assets against 68.4% in 3QFY23.

Outlook & Valuations

We expect its loan book to grow at CAGR of 20% over FY23-26E, led by technology initiatives. The credit cost normalization is underway. We estimate return ratio ROA/ROE of 2.1% and 16.6% in FY24E. We value the standalone entity with 2.7xFY25E BVPS (?392) and of investment in subsidiaries and JVs (?122 per share); we arrive at a target price of ?1,058. We recommend BUY with a potential upside of 20%

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