ICICI Bank Q3 Review: Analysts Say 'Best-In-Class' Performance May Support Rerating
Here's what analysts made of ICICI Bank's Q3 FY22 results...
ICICI Bank Ltd. outperformed peers in the third quarter and is set for the next leg of rerating, according to analysts.
The private lender reported a 25% year-on-year rise in its net profit in the quarter ended December. That was supported by a 23% growth in net interest income and lower provisions.
Its total advances rose 16% over the year earlier. Domestic advances, too, increased 18%.
ICICI Bank also reported net negative slippages as recoveries and upgrades outpaced fresh bad loan additions. Provision coverage ratio stood at 80%, ensuring that the balance sheet is strongly insulated against any stress.
Analysts expect the bank's credit costs to fall further and return on assets and return on equity to improve.
All the 52 analysts tracking ICICI Bank suggest a 'buy. The 12-month consensus price target implies a 17% upside. The stock gained as much as 1.78% in early trade on Monday but pared most of it to trade flat as of 9:43 a.m.
Here's what analysts made of ICICI Bank's Q3 FY22 results...
CLSA
ICICI Bank is reporting sector-best growth in loans and pre-provisioning operating profit.
The bank has reported return on equity of 15.5%, despite conservative provisioning policy, indicating that core ROE is 16-17%.
Expects 19% growth in pre-provisioning operating profit over FY23-24.
The bank is delivering high growth and profitability and deserves premium multiples. It should not be benchmarked to its past cycles.
Reiterates 'buy' with a target price of Rs 1,125 a share.
Morgan Stanley
Expects core pre-provisioning operating profit growth of 20% to sustain, led by further acceleration in loan growth and higher margins as the rate cycle turns.
Credit cost fell to 1.02% from 1.44% in the July-September quarter.
Expects credit cost to remain around or below normalised levels over the next few years.
Return on assets should improve to 1.9% and ROE should improve to 16.5% by FY24. This should drive a sustained re-rating.
Maintains 'overweight' with a target price of Rs 1,125 apiece.
Jefferies
Lower-than-expected credit costs were key to earnings surprise in Q3.
Return on assets at 1.9% is now comparable to industry-best levels of HDFC Bank's 2%.
Along-side an improvement in ROA, credit profile of ICICI Bank's commercial loans has improved and the bank continues to carry 1.3% of loans in buffer-provisions.
Sees small and medium enterprises business show over 25% compounded annual growth rate over FY21-24.
Reiterates 'buy' with a target price of Rs 1,050 apiece.
Kotak Institutional Equities
Execution is good in almost all product categories with industry-leading operating metrics.
Fewer negative surprises on asset quality, growth and operating metrics fuelled investor comfort.
Sees further room for expansion even as the bank is trading close to its peak valuation.
Expansion is likely to be gradual and driven by consistent execution rather than any positive surprise on operating metrics hereon.
Maintains 'buy' with a target price of Rs 975 apiece.
