Buy ICICI Bank Ltd For Target Rs.1,120 - Motilal Oswal Financial Services
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Strong quarter; credit cost continues to undershoot
Guides FY25 margins to be comparable to FY24
* ICICI Bank (ICICIBC) reported yet another quarter of strong performance, with 22% YoY growth in core profitability. However, margins contracted 25bp QoQ.
* Credit growth was robust at 18% YoY, led by continued traction in Retail, SME and BB segments. Deposits saw healthy growth of 19% YoY.
* Asset quality continued to surprise positively as provisions came in 51% below MOFSLe and GNPA/NNPA ratio improved further. The bank maintains a total contingency buffer of INR131b (2.1% of loans), which provides comfort.
* We raise our FY24/FY25 EPS estimates by 3%/4% and expect ICICIBC to deliver RoA/RoE of 2.3%/18.3% in FY25. Maintain BUY with a revised TP of INR1,120.
Business growth steady; margins compress 25bp QoQ
* ICICIBC’s 2QFY24 PAT grew 36% YoY to INR102.6b (6% beat), due to lower provisions (51% below MOFSLe) and healthy business growth. The bank, thus, reported 2QFY24 annualized RoA and RoE of 2.4% and 19.1%, respectively.
* NII grew 24% YoY (in line), aided by healthy loan growth of 18% YoY/5% QoQ, though NIMs moderated 25bp QoQ to 4.53%. Other income grew 14% YoY to INR57.8b, while the bank reported a treasury loss of INR850m. Fee income grew at steady 16% YoY.
* Opex rose 21% YoY, yet PPoP growth was healthy at 22% YoY to INR142.2b (in line). Core PPOP also grew 22% YoY.
* On the business front, advances grew 18% YoY/5% QoQ, led by 15%/21% YoY growth in Domestic/Retail loans. Among retail, housing led the growth, while growth in unsecured credit (PL/CC) too remained strong. Unsecured loans now form ~13% of total loans. SME book increased by 29% YoY, while BB grew 30% YoY.
* On the liability front, deposits grew 19% YoY (+5% QoQ), while CASA deposits declined 1.6% QoQ. Average CASA mix declined 180bp QoQ to 40.8% (period-end CASA ratio at 40.8%).
* Fresh slippages were under control at INR46.9b (2.0% annualized). Healthy recoveries and upgrades enabled a 28bp QoQ decline in GNPA, while NNPA declined by 5bp QoQ to 0.43%. PCR was stable at ~83%. The bank maintains a total contingency buffer of INR131b/1.2% of loans.
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