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Taking tech to a new level; blurring boundaries between Bank and Fintech

Growth trajectory robust; risk calibrated Core PPoP growth remains key

We attended ICICIBC analyst day, where the management demonstrated its digital capabilities and how the bank is building various platforms and solutions to provide an end-to-end digital journey with a seamless and improved customer experience. The bank follows a 360-degree approach with Fair to Bank, Fair to Customer becoming the core mantra for employees at all levels. The key focus continues to be on growing the core PPoP in a risk-calibrated manner with Return of Capital being the core philosophy vs Return on Capital. ICICIBC appears to be several notches above its peers, when it comes to business transformation, led by tech initiatives and these digital capabilities will enable the bank to deliver superior growth over years to come. We expect ICICIBC to register a loan CAGR of 20% over FY22-24E and estimate FY24E RoA/RoE of 2.1%/17.2%. We reiterate our Buy rating with a SoTP-based TP of INR1,150 (3.1x FY24E ABV). ICICIBC remains our top pick in the sector and we believe that besides the steady investment return, owning ICICI Bank stock also brings a sense of pride in every investor’s portfolio.

Corporate Banking – Deepening customer engagements to drive superior profitability

ICICIBC follows a corporate 360-degree approach across segments, covering family offices, employee, supply chain, statutory, and corporate solutions. Data analytics is driving better insights from the complex and large corporate transactions to redefine customer journey, which in turn, helps RM to provide enhanced solutions. ICICIBC has coverage across more than 20 sectors with multi-disciplinary teams. The bank’s focus continues to be on discovering industry best practices and insights to co-create solutions as the bank believes it is by only gaining mind share, one can aim to increase the wallet share.

Customer journeys simplified – Giving wings to businesses by minimizing procedural delays

The bank is constantly focused on devising customer-friendly solutions to simplify its work and improve productivity levels. One such initiative includes digitizing the export journey. Likewise, the bank has launched solutions in textile and supply chain businesses, reducing the sanction time to 29 minutes. One Supply Chain Finance (SCF) and Digital Lite are such platforms which have increased the corporates in supply chain by 60% and dealers and vendors by 90%. Further, the bank provides various solutions for the treasury, forex transactions, small and medium businesses via the InstaBiz and iMobile app, resulting in an increased and improved business metric across most parameters.

iLens – A unified customer loan journey

iLens is a recently launched cloud-based app for an end-to-end journey for retail loans. The bank has ~23k active users on this platform, including 10k channels and 2k agencies. About 95% of incremental mortgage business is getting processed through iLens. The customer can check the status on loan application at every single stage and can also submit queries via iLens and have timely resolution. This has helped reduce load on customer care call centers. In Oct’22, 80% of customers have used this functionality, resulting in a drop in call center volumes.

Gaining market share in payments business, driven by digital capabilities

Credit card business has been completely digitalized and 14% of issuances are executed in 30 minutes and 22% in 30 seconds (for ETB customers). Further, the bank has seen a 67% increase in EMI transactions. The bank has issued ~3.5m cards with Amazon Pay with 65% being to NTB customers over the past three months. Spends for these cards are 20% higher than the industry average, while risk is 30% lower than that of the industry. It has an activation rate of 70% - the best in the industry and had a negligible impact from the recent RBI guidelines on card activation. Further, ICICIBC is offering card less EMI for ETB customers and is live at ~2.5k merchants and 15k retailers. It will soon get live for the other bank customers as well. About 97% of the total country’s collections are done via FASTag with the bank’s market share standing at ~31%. The bank is live on Parking and access controls and is looking to expand both the use cases as well as the geographic penetration.

Retail Banking – Empowering business centres to take full bank to customer

ICICIBC has expanded the role of its Business Centres, thereby taking the full bank to the customer. It is also intensifying its presence in high potential markets and created 104 Zonal heads, 24 city heads, and 9 state heads. It merged rural banking centres with retail centres, while the retail assets distribution is fully aligned with liabilities. SME and private banking teams are converged with retail, while credit business centres are now co-located in business centres. ICICIBC is thus geared up for the next growth cycle with a focus to improve the NII/fee income, lower the cost of acquisitions and opex, and maintain a healthy portfolio quality to grow PPoP in a risk-calibrated manner.

Go-to-market strategy – Customized approach to better tap high growth

ICICIBC is realigning the distribution to capture the opportunities in various markets. Kolkata provides an important micro market opportunity with 12% of the total national MSMEs in these regions. ICICIBC assesses market share and growth trends in different hubs of Kolkata for potential expansion opportunities. Over the past three years, ICICIBC has increased its distribution by 3x in Kolkata to better tap the SME opportunity. Further, Hyderabad provides an important opportunity in the affluent ecosystem, while Bangalore is among the most important IT and startup industry, contributing 41% of the country’s export and 1/3rd of IT manpower with the highest concentration of Unicorns. ICICIBC provides various solutions, aligning with the needs of these markets with focus on increasing digital capabilities to improve the PPoP.

Building multiple Fintechs in the bank; risk-calibrated core PPoP the key

ICICIBC has been reporting strong growth, led by its digital capabilities and its constant efforts toward simplifying customer journeys and strengthening the trust and brand. This will enable ICICI Bank to become a preferred banking partner for its customers. The focus remains on providing an end-to-end digital journey with a seamless and improved customer experience as the bank follows a 360-degree approach with Fair to Bank, Fair to Customer being the core principle. The digital journey for the bank has resulted in increased throughput and improved efficiency, which in turn has resulted in increased market and wallet share. The bank’s focus continues to be on growing the core PPoP in a risk-calibrated manner with Return of Capital being the core philosophy. We expect ICICIBC to register a loan CAGR of 20% over FY22-24E and estimate FY24E RoA/RoE of 2.1%/17.2%, respectively. We reiterate our Buy rating with a SoTP-based TP of INR1,150 (3.1x FY24E ABV). ICICIBC remains our top pick in the sector and we believe that besides the steady investment return, owning ICICI Bank stock also brings a sense of pride in every investor’s portfolio.

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