Buy ICICI Bank Ltd For Target Rs.1,850 by Prabhudas Liladhar Capital Ltd
Remains the best; earning beat driven by core revenue
ICICIBC saw yet another stellar quarter; earnings quality was best among peers as core PPoP beat of 7% was led by core revenue (NII/fees) vs opex beat for peers. Loan growth is back in reckoning, improving since last 4 quarters; it was 5%/20% QoQ/YoY. We raise loan growth for FY27E by 200bps to 17% YoY. Despite Q1 usually being soft, fee grew by 7.5% QoQ driven by strong momentum in corporate, retail & BuB. Provision buffer may absorb one-time ECL impact & on a sustainable basis, ECL may not affect earnings. Due to better NII/fees we raise core PAT for FY27/28E by avg. 5%. We keep multiple at 2.7x on FY28 core ABV and raise TP to INR 1,850 from INR 1,825. Reiterate ‘BUY’.
Strong quarter; beat on core PPoP due to better core revenue:
NII adjusted for IT refund was higher at INR 239.2bn (PLe INR 232.8bn) due to better loan growth and NIM (calc.) which was a beat at 4.38% (PLe 4.27%); reported NIM (adj.) was up 1bp QoQ to 4.28%. Loan growth was higher at 19.6% YoY (PLe 17.9%). Deposit accretion was in-line at 14.0% YoY. LDR was up to 89% (86.6% in Q4’26). Other income was higher at INR 85.8bn (PLe INR 75.7bn) due to 11% beat on fee. Opex at INR 125.7bn was in-line. Core PPoP at INR 186bn was a 7% beat; PPoP was INR 203.9bn. Asset quality was better; GNPA was lower at 1.39% (PLe 1.46%). Gross slippage was INR 55.5bn (PLe INR 66.8bn); recovery was INR 28.5bn (PLe INR 31.5bn). Provision was INR 12.6bn (PLe INR 9.1bn). Core PAT was 9.2% above PLe; PAT was INR 148bn.
Loan growth was driven by corporate/SME:
Loan growth was strong at 5.0% QoQ mainly driven by corporate (6.9%), BuB (6.9%) and rural (6.2%) while retail growth was 2.7%. Healthy corporate growth was a was a function of
(1) shift from bond market,
(2) WC utilization
(3) companies maintaining liquidity buffer. Overseas loan growth was strong (+19% QoQ) on back of higher trade finance activity and increased borrowing by subsidiaries of Indian corporates. BuB accretion was partly aided by ECLGS; portfolio quality is robust due to granularity, healthy security cover and stable asset quality. CC fell by 1.7% QoQ due to lower revolver rates.
Fees surprised positively; no major ECL impact:
Fees grew by 7.5% QoQ, driven by strong business momentum in corporate, retail, and BuB. We raise fees for FY27/28E by avg. ~6%. Bank does not expect any one-time impact due to ECL as any impact will be absorbed by provision buffer. On sustainable basis too credit costs may not increase beyond stated guidance of ~50bps
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