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Strengthens technological leadership further; balance sheet robust

* ICICIBC’s Annual Report highlights the progress the bank is making towards sustainable growth. This is evident from its strong contingency buffers and robust underwriting and risk-monitoring mechanisms, all of which contribute to safeguarding the company’s balance sheet.

* The bank further strengthened its retail franchise with the segment registering 23% YoY growth (18% YoY growth in home loans). Additionally, the bank sustained robust traction in its liabilities. The bank maintains one of the highest proportions of Retail deposits, with a strong CASA mix.

* SME and Business Banking portfolio grew 19% YoY/35% YoY each in FY23, with its mix rising to 12% of loans (8% in FY18).

* The bank continues to strengthen its digital capabilities and launched an array of new products (iLens, Insta Export Packing Credit, Neo Remittance System) besides enhancing InstaBIZ and Merchant Stack tools. The bank now offers superior digital experience to Corporates in over 20 key industries.

* The concentration of the top 20 advances/exposures improved 156bp/181bp to 10.3%/10.2% in FY23. On the liability side, concentration of the top 20 depositors improved further by ~179bp to 3.5%.

* Ahead of the new growth cycle, the bank is well-positioned with a superior margin, strong asset quality, and robust capitalization levels. We estimate ICICBC to deliver RoA/RoE of 2.2%/17.7% in FY25.

* We estimate earnings growth to moderate to 17% CAGR over FY23-25, affected largely by a decline in margins and limited opex/credit cost levers. We retain our BUY rating with SoTP-based TP of INR1,150 (2.6x FY25E ABV).  

Retail growth remains steady; SME and Bus. Banking mix rises to ~12%

ICICIBC remains focused on building a diversified and granular portfolio, and saw healthy growth across Retail, SME, and Business Banking portfolios. The bank also witnessed a recovery in its corporate book, which grew 19% YoY in 1QFY24. The bank has increased its focus on higher yielding Retail loans such as Personal Loans and Credit Cards. The share of Unsecured Retail loans rose to 12.3% of loan book from 5.9% in FY18. Around 60% of loans in this portfolio are extended to its existing customers, with a notable preference toward the Salaried segment (85% of portfolio). ICICIBC has adopted data analytics-driven processes for onboarding, credit assessment, and customer monitoring

Liability traction steady; digital offering aiding business growth

The bank continues to see a strong growth in Retail Deposits and has successfully maintained a robust liability franchise. Total deposits/CASA clocked ~16%/~13% CAGR over FY18-23. CASA ratio has declined to 45.8% in FY23, due to higher growth in Term Deposits. The growth in its deposit franchise was supported by continuous efforts to strengthen its digital platforms and simplify processes to provide a seamless banking experience to customers. While its liability franchise stands strong, the management intends to maintain a healthy and stable funding profile to deliver benefits on the cost of funds. The access to quality and granular low-cost deposits has helped ICICIBC maintain its competitive advantage in the cost of funds over its peers.

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