IGI Logo

ICICI Bank delivered a beat on PAT at 103bn (+8% vs JMFe) on the back of lower opex (+4% QoQ), provision (-55% QoQ) and healthy loan growth. NIMs witnessed contraction by 25bps QoQ primarily on account of TD repricing. Loan growth of +18% YoY/+5% QoQ was broad based with retail segments growing at +20% YoY/+5% QoQ. Deposits growth momentum continued at +19% YoY/ +5% QoQ, led by time deposits (+32% YoY, +9%QoQ). Average CASA ratio stood at 40.8% vs 42.6% QoQ. Going forward, management expects cost of deposits to continue to increase over the next couple of quarters (at 4.53% for 2Q24, +22bps QoQ, 98bps YoY) as deposit repricing plays out. In our view, this could lead to margin compression even further from current levels although, we expect NII growth of 17% for FY24 (implying largely stable NIMs for FY24 vs FY23). Asset quality continues to be in fine fettle with credit costs at 23bps and GNPA/NNPA at 2.63%/0.45% (vs 2.94%/0.51% QoQ). We expect ICICI Bank to deliver avg. RoA/ RoE of 2.2%/ 17.9% over FY24-FY25E and value the bank on SoTP basis with a target price of INR 1155 (core bank valued at 2.7x FY25E BVPS)

* Robust loan and deposit momentum; supported by healthy operational performance: Loan growth of +18% YoY/+5% QoQ was broad based with retail segments growing at +20% YoY/+5% QoQ. Within retail the growth was driven by strong traction in personal loans (+10% QoQ), business banking (+11% QoQ) and credit cards (+6% QoQ). Domestic corporate loan growth moderated to +15% YoY/+3% QoQ. Deposits growth momentum continued at +19% YoY/ +5% QoQ, led by time deposits (+32% YoY, +9%QoQ) whereas; CASA deposits degrew (4% YoY, -2% QoQ). Average CASA ratio stood at 40.8% vs 42.6% QoQ. NIMs witnessed contraction by 25bps QoQ primarily on account of TD repricing. Mgmt. expects NIMs to contract further as some portion of deposits are yet to be repriced; none the less they are expected to end the year around 4.5% similar to FY23. PAT stood at 103bn (beat on JMFe by +8%) on the back of lower opex (+4% QoQ), provision (-55% QoQ) and healthy loan growth. We expect loan CAGR of 17% over FY23-25

* Asset quality in fine fettle with lower credit costs: Gross slippages moderated to 1.83% (INR 47bn vs 53bn QoQ) vs 2.18% QoQ partly due to lower additions from the agriculture portfolio on account of seasonally strong quarter and net slippages were at INR1.2bn (0.05% of loans) due to benefits of upgrades/recoveries. Gross slippages across segments has been comfortable with retail, rural, business banking contributing INR 43.64bn as against corporate and SME at INR 3.23bn. ICICI Bank has undertaken a sale of NPA worth INR 1.79bn in 2Q24 which included INR 0.14bn in cash and INR 0.53bn via SR’s. Management indicated despite strong growth in unsecured portfolio over the last few years, they are not seeing any concerning trends. Credit costs stood at 23bps (vs 53bps QoQ). We build avg. credit costs of 51bps over FY24/FY25.

* Valuation and view: We believe ICICI Bank firmly remains on a path to deliver 2.2%/17.9% avg RoA/ RoE over FY24-25E with stable asset quality and continued growth

Please refer disclaimer at https://www.jmfl.com/disclaimer

SEBI Registration Number is INM000010361