ICICI Bank Q4 review: Domestic brokerages see up to 30.5% upside in stock

Shares of ICICI Bank rose as much as 2.55 per cent to Rs 906.75 apiece on the BSE intraday on April 24 after the bank reported a better than expected results for the fourth quarter of the fiscal 2022-23 (Q4FY23). The private sector lender’s profit rose by 30 per cent year-on-year (YoY) to Rs 9,121.8 crore, as compared to Rs 7,018.71 crore registered in the corresponding quarter of the previous fiscal. 

Zee Business Research had estimated ICICI Bank’s profit at Rs 8,850 crore for the quarter under review.

Its net interest income (NII) – or the difference between interest earned and interest paid – grew by 40 per cent to Rs 17,666.8 crore in the March quarter of the previous fiscal as compared to Rs 12,604.6 crore in the corresponding quarter of FY22. Zee Business Research had estimated the NII would come to Rs 17,200 crore. Further, NIM or net interest margin, which is a key measure of profitability for lenders, also saw an increase. NIM stood at 4.9 per cent in the March quarter as compared to 4.65 per cent in the December quarter of the previous fiscal, while it was at 4 per cent in the corresponding quarter of the fiscal year 2021-22.

The bank's asset quality also improved as its gross non-performing assets (NPA) ratio declined to 2.81 per cent from 3.07 per cent sequentially, while its net NPA ratio declined to 0.48 per cent from 0.55 per cent quarter-on-quarter (QoQ).

Commenting on the Q4 numbers, JM Financial notes that it continues to like management’s consistent focus on risk-adjusted core pre-provision operating profit (PPOP), capturing the maximum value in the customer ecosystem while keeping asset quality under check. 

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The brokerage maintains its positive stance on the stock in light of "highly efficient large liability franchise, robust capital ratios, strong provision coverage ratio (PCR) and steady asset quality and strong return profile and superior digital prowess." It has a 'buy' rating on the stock with a target price of Rs 1,115.

LKP securities, too, remain bullish on the stock. "We expect its loan book to grow at a compound annual growth rate (CAGR) of 20 per cent over FY23-26E, led by technology initiatives. The credit cost normalisation is underway. We estimate a return ratio ROA/ROE of 2.1 per cent and 16.6 per cent in FY24E. We value the standalone entity with 2.7xFY25E BVPS (Rs 392) and investment
in subsidiaries and joint ventures (Rs 122 per share); we arrive at a target price of Rs 1,058. We recommend BUY with a potential upside of 20 per cent," the brokerage said in its results review note.

The lender also declared a dividend of Rs 8 per equity share while announcing quarterly results. 

Analysts at Nirmal Bang Securities also remain bullish on the stock. "We remain positive on ICICI Bank given its growth outlook and earnings trajectory with return ratios to remain in the top quartile going forward. We maintain BUY on ICICI Bank with a target price (TP) of Rs 1,154 (SOTP based)," it wrote.