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Growth momentum sustained in Q1

ICICI Bank is India’s second-largest private sector bank, with 5,534 branches and 13,379 ATMs across the country. Of the total branch network, ~51% are in semi-urban and rural areas.

• Standalone Q1FY23 net interest income (NII) grew at 20.8% YoY with NIM expanding 12bps YoY to 4.01%.

• Core operating profit (profit before provisions and tax, excl. treasury income) rose 19% YoY to Rs. 10,273cr in the quarter.

• Robust growth in deposits and advances, improving asset quality and with further reductions in gross and net NPA levels will drive the bank’s performance over the medium term. Hence, we reiterate our BUY rating on the stock, with a target price of Rs. 932 based on SOTP.

Solid performance during the quarter

Overall loan portfolio grew by 21.3% YoY and 4.3% QoQ as of June 30, 2022. Total period-end deposits grew 13.4% YoY as of June 30, 2022. CASA deposits rose 15.8% YoY, with average CASA ratio at 45.8% in Q1FY23. The bank’s NII increased 20.8% YoY to Rs. 13,210cr in Q1FY23 from Rs. 10,936cr in Q1FY22. Over the period, core operating profit (PPOP) rose 19% YoY to Rs. 10,273cr from Rs. 8,605cr; excluding dividend income from subsidiaries/associates, core operating profit grew 21% YoY in Q1FY23. PAT rose 49.6% YoY to Rs. 6,905cr in Q1FY23, and NIM was 4.01% compared with 3.89% in Q1FY22. Non-interest income, excluding treasury income, increased 25% YoY to Rs. 4,629cr in Q1FY23 from Rs. 3,706cr in Q1FY22. Fee income grew by 31.8% YoY to Rs. 4,243cr from Rs. 3,219cr over the period. Liquidity coverage ratio for the quarter was ~127%, reflecting continued surplus liquidity.

Asset quality improved along with loan growth

Net NPA ratio improved to 0.70% as of June 30, 2022, from 0.76% on March 31, 2022, and 1.16% on June 30, 2021. During the quarter, there was net addition of Rs. 382cr to gross NPA, excluding write-offs and sale. The provisioning coverage ratio on NPAs was 79.6% as of June 30, 2022. Total provision during the quarter was Rs. 11.44 billion, or 11.10% of core operating profit, and 0.53% of average advances.

Key concall highlights

• The bank’s capital position remained strong, with CET-1 ratio of 17.23%, tier 1 ratio of 17.95%, and total capital adequacy ratio of 18.74%.

• iMobile Pay app saw 7.3mn activations by non-ICICI account holders as on June 30, 2022, and the value of transactions increased 35% QoQ.

• The bank launched Campus Power, an online platform providing various banking solutions such as loans, bank accounts, foreign exchange remittances and valueadded services to students pursuing higher education in India and abroad.

Outlook and valuation

ICICI Bank reported robust operating performance, driven by a combination of impressive core PPOP performance and controlled provisions. The bank also saw robust growth in deposits and advances. Overall business growth was better than the industry average as the bank’s asset quality continued to improve, while PCR remained one of the best in the industry, and NPA levels continue a downward trend. Hence, we remain positive on the stock, and reiterate our BUY rating with a target price of Rs. 932 based on SOTP.

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