ICICI BANK Rating: Buy | Customer 360 is the mantra for growth

‘One-bank, one-RoE’ was the biggest takeaway from the analyst meet

ICICI BANK Rating: Buy | Customer 360 is the mantra for growth
As per the CEO, macro tailwinds provide the best-in-37-years opportunity to Indian banks.

By Nuvama Research

ICICI bank hosted its fourth annual analyst day to showcase its new digital launches and quantify how its bank-tech initiatives and one-bank-one-RoE strategy are delivering market share gains across segments.  ICICI’s CEO reiterated the bank’s core objectives: (i) Customer 360 approach—meaning taking the whole bank to the customer, not a few products. (ii) return on capital focus via granular profit and (iii) Building the most trusted brand.  ICICI has reinforced its digital lead over peers in the past year. India’s resilient macro/positive structural changes in corporate and consumer behaviour provide the best-in-37-years opportunity for Indian banks.

Our key takeaway was that the Customer 360 and ‘one-bank, one RoE’ strategies sounded idealistic four years ago, in our view. But, it has now percolated through to all cadres of the bank, which we believe will help ICICI maintain its lead in profitability for a sustained period. Reiterate ‘BUY’ and top pick with an unchanged target price of Rs 1,115.

Macro tailwinds and strong execution make ICICI a winner

As per the CEO, macro tailwinds provide the best-in-37-years opportunity to Indian banks. There has been a structural change in the mind-sets of consumers/corporate borrowers in the last three years. With fully functional bureaus, most customers are focussed on maintaining credit scores, reducing delinquencies structurally. Corporates are focussed on leverage, capital structure, smoother supply-chains and service deliveries. India’s digital revolution since covid, GST implementation and demographics add to the behavioural changes, providing strong opportunity to the banks. ICICI’s digital lead over peers, strong execution and most importantly, a change in culture will help strengthen its best-in-class profitability.

Also Read: ICICI Bank shares outperform Nifty50, rally 22% so far in 2022; should you buy, hold or sell?

Among some of the new initiatives are new digital launches: (i) i-Lens, an integrated digital lending platform, has gone live for mortgages. (ii) New platform for new-to-bank (NTB) MSME in the flagship InstaBiz app. (iii) Launch of i-Score. (iv) Launch of a real estate stack and an education ecosystem. ICICI presented many numbers to demonstrate how it has strengthened its digital lead over the last one year. The bank has also started a unique concept of corporate workshops, which has deepened wallet share. The CEO is focussed on building capacity at the bank, which implies that ICICI Lombard stake sale will happen.

Also Read: ICICI Bank’s Q2 profits jump 37%

With rising impetus on its bank-tech initiatives/strong execution/ favourable macro tailwinds, we believe ICICI is set to sustain its best-in-class profitability with digitally led, market share gains in all segments. ‘One-bank, one-RoE’ was the biggest takeaway from the meet – which once sounded too idealistic, is now being imbibed even by the RMs and branch staff, leading to significant change in DNA/culture from a lumpy, business-growth-oriented approach to a sustainable, granular profitability approach. This, and ICICI’s clear bank-tech leadership amidst India’s digital revolution, lends ICICI an edge over its peers. ICICI remains our top pick with a TP of Rs 1,115 as we believe that the Customer 360-approach will enable gains for shareholders. We believe that even if regulations were to turn favourable, ICICI will likely go ahead with divesting its stake in ICICI Lombard.

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First published on: 06-12-2022 at 03:30:00 am