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Nirmal Bang Report
We reiterate ICICI Bank Ltd. as our top pick in the banking space given the visibility of 2% return on asset by FY24E on the back of 21% compound annual growth rate in net profit over FY22-24E.
Given the current increasing interest rate environment, the bank seems one of the best placed from ROA accretion perspective given its higher share of external benchmark lending rate linkage, enabling faster transmission of rate increases on the asset side. We see few more levers to net interest margin expansion such as:
improving loan/deposit ratio and
increasing share of unsecured lending.
Further, growth prospects seem far better for large cap banks given their low cost of funds advantage vis-a-vis small-cap and mid-cap peers. This directly benefits ICICI Bank given it's the market-leading position in retail as well as corporate segments.
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