Buy ICICI Bank Ltd For the Target Rs.1,503 by Choice Broking Ltd
Standing tall: ICICI Bank outpaces industry slowdown with impressive results.
ICICIBC delivered an impressive performance in Q3FY25, in line with market expectations with outperforming business growth, stable asset quality in times of systemic stress and strategic cost reductions.
* Advances grew 13.9% YoY to INR 13,144 Bn (vs CEBPL est. 13,184) while deposits grew 14.1 % YoY to INR 15,204 Bn(vs CEBPL est. 15,091) beating the industry growth rates of 10.14% and 9.83% respectively. CD ratio remained flat at 86.4% in Q3FY25.
* Asset quality remained stable as slippage ratio remained low at 0.48%. GNPA/NNPA reported at INR 277/59 Bn (vs CEBPL est. 272/57). GNPA/NNPA ratio was steady at 1.96%/0.42%.
* PAT for Q3FY25 reported at INR118Bn, (vs CEBPL est. 109 Bn) was up 14.8% YoY and 0.4% QoQ. EPS for Q3FY25 is INR16.45
Network expansion and holistic growth approach driving business growth: ICICIBC added 129 branches in Q3FY25 supporting the deposit mobilization that grew 14.1% YoY. CASA improved 86bps on YoY basis. However we don’t expect this improvement to persist going forward. The bank reported loan growth at 13.9% YoY which was supported by robust growth in Business Banking segment that grew 31.6%. The unsecured portfolio was flat as management witnessed stress build-up in the segment. We believe that current run rate in advances will persist till FY26.
Improving efficiency to cushion margin pressures: Yield on advances and cost of funds are in diverging trend which is expected to continue in anticipated rate cut scenario as 51% loan portfolio is repo linked. We expect NIM to remain under pressure. Credit Cost is also expected to be around 0.5% which stood at 0.37% in Q3FY25. C/I ratio reported at 38.5% in Q3FY25 is expected to follow the downward trend providing some cushion to PAT margins.
Stable asset quality despite systemic stress: The bank navigates its way through industry headwinds with its head high as it reported stable GNPA and NNPA at 1.96% and 1.42% in Q3FY25. The slippage ratio improved 4 bps on YoY basis but declined 6 bps on QOQ basis. The PCR contracted 50 bps in Q3FY25.
View and Valuation: We revise our FY25/26 ABPS estimates by 0.3%/-1.3% and reiterate the ‘BUY’ rating with a revised TP of INR1,503, valuing it at 2.96x FY26 P/ABPS. This translates in INR 1336 per share on standalone basis. We value its subsidiaries at INR 167 per share. The management is enthusiastic about 360 degree business growth despite industry wide slowdown and expects a double-digit growth FY26. Continued focus on digitalization will promote operational efficiency that will provide some support to NIM compression.
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