ICICI Bank Q4 Results Review - Business Growth Remains Strong; NIM Compression On Expected Lines: Nirmal Bang

Nirmal Bang Report

ICICI Bank Ltd.’s Q3 FY24 performance was better than our expectations, with net interest income/pre-provision operating profit/profit after tax coming in at a variation of 0.2%/0.5%/6.6% versus our estimates.

PAT grew by 17.4% YoY on the back of strong loan growth of 16.8% YoY, lower credit cost with improved asset quality and part reversal of Rs 1.2 billion from the Rs 6.3 billion AIF provisions made in Q3 FY24.

Net interest margin continued to compress by 3 bps QoQ to 4.4% due to 10 bps QoQ increase in the cost of funds due to a lag in deposit repricing and absence of IT refunds, which had 4 bps impact last year.

We remain positive on ICICI Bank given its healthy growth outlook and earnings trajectory with return ratios expected to remain healthy. While the momentum in balance sheet growth is expected to remain strong, the bank has guided that the NIM will remain under pressure in the near term.

We expect earnings to clock a compound annual growth rate of 13.2% over FY24-FY26E on the back of 16.3% CAGR in the loan book, 4.4% average NIM, 39.3% average cost/income ratio and 53 bps average credit cost.

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