IGI Logo

Steady quarter; robust other income drives earnings beat 

NIM moderates 4bp QoQ 

* ICICIBC reported a steady quarter, with 15% YoY growth in net earnings (4% beat).

* NII was in line, while other income was strong, led by healthy treasury gains and dividends. NIMs inched down 4bp QoQ to 4.36%.  

* Credit growth was healthy at 15.7% YoY/3.3% QoQ, led by healthy traction in SME and BB, and relatively slower but decent growth in retail. Deposit growth was slower at 15.1% YoY/0.9% QoQ, similar to peers.

* On the asset quality side, slippages were slightly higher at INR59.16b/ 2.2% owing to seasonal KCC slippages. GNPA/NNPA ratios stood broadly flat at 2.15%/0.43%, while contingency buffer remained unchanged at INR131b (1.1% of loans).

* We fine-tune our EPS estimates for FY25/FY26, projecting RoA/RoE of 2.19%/17.3% by FY26. Reiterate BUY with SoTP-based TP of INR1,400. 

Asset quality stable; well poised to sustain growth leadership 

* ICICIBC’s 1QFY25 PAT grew 15% YoY to INR110.6b (in line), led by steady NII and robust other income even as provisions and opex were slightly higher than expected. The bank reported annualized RoA of 2.36% and RoE of 18%.

* NII grew 7% YoY/2.4% QoQ (in line), as the bank reported healthy credit growth at 15.7% YoY/3.3% QoQ. NIMs declined 4bp QoQ to 4.36%. Other income surprised positively (15% beat), driven by healthy treasury gains and dividends from subs.

* Opex rose 11% YoY (largely in line), as 1Q factored in seasonality of employee increments. PPoP thus grew 13% YoY at INR160b (5% beat). Core PPOP grew 11% YoY/ 0.6% QoQ.

* On the business front, advances grew 15.7% YoY/3.3% QoQ, led by BB/SME loans and relatively slower growth in retail. Within retail, housing and rural grew at a healthy pace, while unsecured credit (PL/CC) continued to grow at a healthy pace. Unsecured loan mix stood at 14% of total loans. SME book increased by 24% YoY, while BB grew 37% YoY.

* On the liability front, deposits grew 15.1% YoY/0.9% QoQ, led by faster growth in TDs, whereas CA book declined after seasonal flows in 4Q leading to a decline in the CASA ratio to 40.9% (down 125bp QoQ).

* Fresh slippages inched up to INR59.2b/2.2% amid KCC slippages of INR7.2b. GNPA/NNPA ratios stood broadly flat at 2.15%/0.43%. PCR stood at ~80% in 1QFY25 (down 56bp QoQ).  

Highlights from the management commentary 

* Yields slightly decreased despite an increase in the share of high-yielding products.

* There were good gains in the SR portfolio due to redemptions. MTM on FVTPL, now recognized in P&L, led to healthy treasury income. 

* The new investment guidelines have increased the AFS reserve by INR32b.  

* LDR is in the low to mid-80s and is expected to stay around these levels.

* The pace of recoveries in retail will vary, and a slowdown is expected. Credit cost is below 50bp but might gradually increase. 

Valuation and view: Maintain Buy with a revised TP of INR1,400 

ICICIBC reported a steady quarter, unlike many of its large peers. NII growth has been consistent, and the pace of NIM compression has slowed, while opex has been well under control, even after adjusting for employee increments in 1Q. The bank's substantial investment in technology offers some cushion against opex costs. A stable mix of a high-yielding portfolio (Retail/Business Banking) and ongoing growth in Business Banking, SME, and secured retail segments are driving broad-based growth, helping the bank maintain healthy business diversification. Asset quality has remained stable, with no signs of stress, leading to stable GNPA/NNPA ratios. The additional contingency provisioning buffer of INR131b (1.1% of loans) provides further comfort in case of any future cyclical stress. We cut our EPS estimates slightly by 2.3%/2.0 for FY25/FY26 and estimate RoA/RoE of 2.19%/17.3% in FY26. We expect the bank to sustain a ~12% CAGR in PAT over FY24-26E. Reiterate BUY with an revised SoTP-based TP of INR1,400 (2.7x FY26E ABV + INR227 for subs) (previous TP of INR1,350). 

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html

SEBI Registration number is INH000000412