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Private sector lender ICICI Bank Ltd remains committed to becoming a full-scale technology-driven bank from a traditional bank. At its analyst day event held on 4 December, the management presented the bank’s industry-first digital offerings for retail and SME/corporate customers.
The management said that customer data in the banking sector has exploded over the past few years driven by factors including rapid growth in digital payments. Further, 74% of ICICI Bank’s customers are digitally active.
According to the management, retail internet banking (iMobile) has 19 monthly logins per user and corporate internet banking (InstaBIZ) has 37 monthly logins per user. The bank has seen 4.5 million activations in iMobile Pay from non-ICICI Bank customers and 10% of the users have bought one ICICI bank product. There has been a 45% year-on-year increase in average ticket size on iMobile Pay, added the management.
An array of brokerages gave a thumbs-up to the bank’s digital thrust and continue to maintain their positive stance on the stock. "We believe ICICI Bank remains at the forefront of technology prowess and adoption amongst peers," analysts at JM Financial Institutional Securities Ltd said in a report. “With some banks still focusing on fixing their back-end tech, ICICI, with its early-stage investments, is now focusing on industry-first tech front-end offerings to captive/NTB customers and gaining market share," analysts at Emkay Global Financial Services Ltd said.
Among foreign research houses, CLSA Ltd said that the bank is ahead of its peers in its digital initiatives and also a new growth leader. ICICI remains one of its top picks in the sector, CLSA said.
Despite this optimism, on Monday, there were no fireworks as far as the stock’s reaction is concerned. However, on Tuesday, the stock rose nearly 4% intraday on the NSE. That said, valuations may not improve in a hurry. Some analysts point out that execution is the key here and its consequent impact on earnings.
“The latest strategy promises the leap from “Good to Great". We take note of its vast wealth of data and deep franchise moats on liabilities to surmise that if the bank executes along the lines articulated in its presentation, its success and therefore a sustained re-rating to sector-leadership valuations are possible," Edelweiss Securities Ltd said.
Analysts at Nomura Financial Advisory and Securities (India) Pvt. Ltd point out that the core bank (excluding subsidiaries) trades at a valuation multiple of 2.5 times on a price-to-book basis (on current book value), retracing back from the key levels of 2.8-3 times. “We think a further re-rating i.e. beyond 2.8-3 times price-to-book will be contingent upon delivering steady earnings per share growth over several years," it said in a report.
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