What should investors do with ICICI Bank post Q2 results: buy, sell or hold?

ICICI Bank share price rose over 6 percent in early trade on November 2 after the company reported better-than-expected numbers for the quarter ended September 2020.

On October 31, the company reported a profit of Rs 4,251.3 crore in the September quarter, a six-fold jump from a profit of Rs 655 crore in the same quarter of the last fiscal.

Net interest income (NII), the difference between the interest income from lending and the interest paid to depositors, during the quarter was up 16.2 percent at Rs 9,366.1 crore from Rs 8,057.4 crore, YoY.

The bank has posted a net interest margin at 3.57 percent against 3.69 percent in the previous quarter QoQ.

Here are the brokerages' views on the stock:

Sharekhan

Sharekhan believes valuations are reasonable, considering the overall franchise value as a whole and strong capitalisation and a high provision coverage ratio (PCR) being key comfort factors. Capital raising has further augmented capital base (up by 247 BPS from Q1 FY21) adding to balance sheet strength. It maintains a buy rating on the stock with a revised price target of Rs 525.

Motilal Oswal

ICICI Bank reported a steady quarter, with opex control and lower provisioning driving earnings growth. Business trends are improving, with disbursement reaching pre-COVID levels/higher than pre-COVID levels (in some segments). Demand resolution has reached ~7% of pre-COVID levels, with the SMA/overdue book 1–4% higher across segments.

The bank expects the corporate restructuring book to be 1% of loans and guided for normalisation of credit cost in FY22. The liability franchise continues to improve, with the cost of deposits declining to 4.2%, while a lower CD ratio provides a strong growth opportunity. Motilal Oswal maintains buy with a SOTP-based target price of Rs 525.

Dolat Capital

While corporate stress remains a key monitorable, Dolat Capital derive confidence from ICICI Bank's prudent provisioning, strong capital position, healthy liability profile, digital capabilities, and market-leading subsidiaries. It maintains buy recommendation on the stock with a SOTP-based target price of Rs 510.

Prabhudas Lilladher

Overall operations were steady & in-line. Collections efficiency is improving to near to pre-COVID, while overdue loans are still 3-4% higher than pre-COVID and should improve ahead. On restructuring, bank is seeing a very low outcome with corporate restricted to less than 1% of loans and retail under control.

Prabhudas Lilladher retains buy with a revised target price of Rs 520 (from Rs 462).

LKP Research

LKP Research expects its loan book to fatten cautiously at CAGR of 10% over FY21-23E, led by balanced growth across segments. The bank’s asset quality may witness some hiccups and it estimates return ratio ROA/ROE of 0.9% and 8.6% inFY22E.

It values the standalone entity at 1.9xFY22E BVPS (Rs 188) and its investment in subsidiaries and JVs at Rs 114 per share to arrive at a target price of Rs 471 and recommend buy rating with a potential upside of 20%.

Citi

Research house Citi has maintained buy rating with a target of Rs 550. The retail growth was strong while fees improved. The credit cost normalisation by FY22 should drive RoA.

It raises FY21/FY22 profit estimates by 12%/8% and the bank remains its preferred pick in the sector.

Nomura

Nomura has kept buy rating with a target at Rs 525. The bank posted stellar performance and retain as a top pick. The normalisation may happen faster than expected.

It raises core PPoP estimates by 9-10% & lower credit cost. The FY21-23 EPS estimates increased by 10-20%, reported CNBC-TV18.

CLSA

CLSA maintains buy and raised the target to Rs 560 from Rs 500.

The management expects normalised credit costs by FY22. The company delivered strong Q2 with a big core PPoP beat.

CLSA increased its FY21/22/23 profit estimates by 49%/19%/7% and expect RoE to be back to 14-15% by FY23, reported CNBC-TV18.