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Key Highlights of Q4FY24 Results

Net additions of Rs.1,220 cr to gross NPAs in the current quarter compared to Rs.3,630 cr in the previous quarter. The sequential increase is primarily due to higher recoveries and upgrades from the corporate and SME portfolio during the previous quarter. The net additions to gross NPAs were Rs.1,710 cr in the retail, rural and business banking portfolios and there were net deletions of gross NPAs of Rs.490 cr in the corporate and SME portfolio. The gross NPA additions were Rs.5,139 cr in the current quarter compared to Rs.5,714 cr in the previous quarter. Recoveries and upgrades from gross NPAs, excluding write-offs and sale, were Rs.3,920 cr in the current quarter compared to Rs.5,351 cr in the previous quarter. The net NPA ratio was 0.42% at FY24 compared to 0.44% at December 31, 2023 and 0.48% at FY23. The provisioning coverage ratio on NPAs was 80.3% at March 31, 2024. In addition, the Bank continues to hold contingency provisions of Rs.13,100 cr or about 1.1% of total loans at FY24.

Loan book grew by 16.2% yoy, with corporate advances growing by 10% yoy and retail book growing at 19%. Coming to the growth across retail products, the mortgage portfolio grew by 14.9% yoy and 3.1% qoq. Auto loans grew by 19.2% yoy and 2.3% qoq. Personal loans grew by 32.5% yoy and 5.0% qoq compared to 37.3% yoy and 6.4% qoq at December 31, 2023. The Bank continued to work on increasing pricing, further refining credit parameters and optimising sourcing costs resulting in lower disbursements of personal loans during the quarter as compared to the previous quarter. The credit card portfolio grew by 35.6% yoy and 6.5% qoq. The personal loans and credit card portfolio were 9.9% and 4.3% of the overall loan book respectively at FY24.

On the P&L front, NII grew at 8% yoy, the net interest margin was 4.40% in this quarter compared to 4.43% in the previous quarter. The domestic NIM was 4.49% this quarter compared to 4.52% in the previous quarter. The bank has raised the cost of deposits by 10 bps in Feb-24, the impact of which will be reflected in Q1FY25. Management expects slight moderation in NIM, however it will be range-bound for the next few quarters.

OUTLOOK AND VALUATION

ICICI Bank is expanding its franchise with high branch addition in the recent past, as it witnesses market opportunities across different markets. The cost of deposits is expected to increase in the near term, however, net interest margin is expected to remain strong above 4% on account of high yielding portfolio. With a strong balance sheet and capital position, the bank is geared to capitalise on growth opportunities in the system. We believe high loan growth, strong CASA deposit franchise and digital initiatives should lead to a healthy ROE/ROA of 17.1%/2.2% by FY26. We have a SOTP-based target price of Rs.1,208 (2.5x FY26E ABV for the bank) with a period of 18-24 months.

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