Shares of ICICI Bank today jumped nearly 8% to ₹822 after the lender on Saturday reported a nearly 30% jump in net profit in the second quarter to a record, led by strong loan growth. The private sector lender’s net income jumped to ₹5510 crore in the quarter-ended September, beating the average estimate of ₹4980 crore estimates by analysts in a Bloomberg poll. The lender’s domestic loan portfolio grew by 19% year-on-year.
The bad loan ratio at ICICI Bank narrowed to 4.82% in the three months to September, down from 5.15% in the previous quarter. The bank set aside ₹2713 crore in provisions in the September-quarter, down from the ₹2852 crore in three months earlier.
“This recent outperformance in Bank Nifty is justified by the bank results so far and the trend may continue since there is valuation comfort in the banking segment in an otherwise overvalued market,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services. The Bank Nifty index today hit a new high while Nifty was slightly lower.
For domestic brokerage Motilal Oswal, ICICI Bank remains among its top plays for the sector with a target price of ₹1,000. “ICICI Bank holds COVID-19 related provisions of ₹6425 crore (0.8% of loans), which gives us comfort on stable credit cost trends. We increase our estimates for FY22/FY23 by 5%/2.5% and project RoA/RoE of 2%/16.6% by FY24E,” the brokerage said.
Another brokerage Emkay said “even amid higher opex and no Covid provision reversal, ICICI once again reported a beat on PAT at ₹5500 crore- up 30% yoy on strong core profitability (up 23% yoy). This was driven by strong credit growth at 17% yoy (vs. HDFCB’s 15%), historically high NIMs at 4% (10bps short of HDFCB), strong fees and dividend, and better asset-quality outcomes.” ICICI Bank remains one its top picks for the banking sector with target price of ₹962.
“The bank has been delivering strong retail growth (20% yoy), while SME/BB growth is also robust now (albeit on a low base). 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 (21% CAGR in FY22-24E),” Emkay said.
Another brokerage Nirmal Bang has upgraded its earnings estimates for ICICI Bank “on back of (1) higher margins as we expect further improvement led by unwinding of surplus liquidity and increasing share of high margin unsecured portfolio (2) lower provisioning as asset quality improves further.”
“We expect ROE of 15% by FY23-24E. We maintain BUY rating on the stock with a target price of Rs886 based on 2.4x H1FY24E standalone ABV and ascribing a value of Rs225 to subsidiaries,” the brokerage said.
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