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ICICI Bank Ltd (ICICI) delivered a solid performance for Q4FY21 with superlative growth across all parameters. One of the single-most important take away is the Bank’s ability to grow its loan book without compromising on asset quality and retaining profitability in the most trying times. We reaffirm our BUY recommendation on the stock with a revised price target of INR 805, which represents a potential upside of 34.4% from the CMP of INR 598.8 (FY24 P/Adj BV 1.9x) over a period 24 months.

Our optimism stems from the following:

Granular retail growth to remain robust; Corporate lending starts trending up.

One of the hallmarks of FY21 has been the strong retail credit growth witnessed by the bank. Retail lending grew at 19.9% YoY in FY21 led by strong growth across mortgages (+21.7%YoY), Business Banking (+40.5% YoY), vehicular loans (+10% YoY), jewel loans for rural segments and digital platforms such as InstaBiz and TradeOnline.

The corporate lending which was subdued since FY16 has seen a clear bump-up in Q4FY21 with a 10.1% YoY growth to INR 1,76,635 Cr, driven by strong uptick in the capex cycle. In our opinion, the quality of the corporate lending has improved substantially compared to the past as can be seen from the extremely selective approach of lending to high rated corporates and PSUs. This is evident from the improved share of lending to higher rated category as seen in the chart below.

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