ICICI Bank Q2 Review: The New 'Best In Class'?
ICICI Bank Ltd. reported a record profit for the second quarter, as loan growth and core income remained strong. The bank also reported its lowest level of net non-performing assets in nearly seven years, suggesting that it has finally shed the turbulence that followed the previous credit cycle.
Net profit for the quarter-ended September rose 29.6% to Rs 5,510.95 crore, as compared with Rs 4,251 crore a year ago. Net interest income was up 24.8% over last year to Rs 11,689.7 crore. It's net NPA ratio fell to below 1% while the gross NPA ratio fell to 4.82%.
Here's what brokerages had to say about the earnings:
CLSA
ICICI Bank delivered strong results with pre-provisioning operating profit growth of 21%, driven by a margin beat.
Its gross slippages moderated to 0.7% of loans from 1% in the first quarter.
The bank is now consistently delivering the sector-best growth in loans and continues to cement its growth-leading position.
Recent trends suggest credit costs will likely undershoot.
We expect a return on risk weighted assets of 2.9%, which is similar to HDFC Bank Ltd.
We thus increase the target price from Rs 1,000 to Rs 1,100.
Dolat Capital
The bank reported a strong quarter with continued traction in net interest margin (up 10 basis points to 4%), improving core pre-provisioning operating profit, better asset quality and healthy advances growth.
NIM benefitted from continued decline in cost of funds and lower net slippages during the quarter.
We factor in credit costs of 90-95 basis points over FY23-24E.
Sequential loan growth in mortgage (6% quarter-on-quarter), unsecured credit cards/personal loans (9% quarter-on-quarter), business banking and SME portfolios (11-12% quarter-on-quarter each) were particularly strong.
With improving core operating metrics and healthy NIM/growth outlook, we expect the bank to trade at a multiple to 2.7x from 2.5x earlier.
We maintain our 'Buy' recommendation on the stock with a target price of Rs 890.
Emkay
ICICI Bank once again beat street expectations with 30% growth in net profit driven by strong core profitability.
This was driven by strong credit growth at 17% year-on-year, historically high NIMs at 4% (10 basis points short of HDFC Bank), strong fees and dividend, and better asset-quality outcomes.
The bank has been delivering strong retail growth (20% year-on-year), while SME and business banking growth is also robust now. Corporate growth should revive soon too.
ICICI, armed with its strong product offerings, franchise network and superior digi-banking platform, should deliver better credit growth and thus core profitability as well.
Asset-quality outcomes amid the pandemic were better than expected, with the gross NPA ratio down 33 basis points quarter-on-quarter to 4.8%, while the restructured pool was contained at 1.3% of loans (versus HDFC Bank's 1.7%), with adequate provision buffer at 20%.
ICICI Bank remains our top pick, given its consistent outperformance. Retain 'Buy' and raise target price to Rs 950.
