ICICI Bank share price has tanked more than 5 per cent so far in 2022. The stock has underperformed benchmark Nifty Bank which has climbed 2 per cent this year. Despite the correction in ICICI Bank scrip, Ventura Securities is bullish on the private lender. The Domestic brokerage firm has reinitiated coverage with ‘Buy’ rating on the stock with a target price of Rs 1,024, implying 47 per cent potential rally. It sees an upside potential of 47% over a period of 18 months given the fact that “ICICI Bank is at the forefront (among the big private sector banks) to benefit from the upswing in the Indian economy.”
Asset quality to remain stable, NII to grow
Ventura expects ICICI Bank’s asset quality to remain stable with GNPA and NNPA expected to fall to 4 per cent and 0.8 per cent in FY24. NII is expected to grow at 16.6 per cent CAGR to Rs 61,883.2 cr with NIMs improving by 23bps to 3.8%.The brokerage estimates cost to income ratio to remain stable at 40% levels although quicker adoption of digital banking by clients can lead to a fall in the same.
Healthy loan book growth expectation, Superior return ratios:
Ventura expects ICICI Bank to increase its loan book at a 14.6% CAGR Rs 11,03,866 crore over FY21-24 driven by 10.5% CAGR in corporate lending, 13.6% CAGR in retail, 21% in SME loans, 7.3% in overseas loans and 3% in BRDS/IBPC loans. It also expects return ratios namely RoAA and RoAE to move by 25bps & 118bps from 1.4% & 12.3% in FY21 to 1.6% & 13.4% in FY24.
Faster adoption of digital strategy may lead to higher net profits
In recent times, ICICI Bank has upped the ante in terms of its digital offering to compete with Fintech firms. “Acceleration on that front can lead to a fall in cost to income and higher net profits in the future,” said Ventura in its note. ICICI Bank has introduced iMobile Pay which is the bank’s own universal fintech app. The app is scalable and has already got around 5.3 million activations from non ICICI Bank customers and a 73% increase in value of transactions.
AUM, PAT Growth estimated around 12-15%
Going forward, ICICI’s total AUM and NII is estimated to grow at a CAGR of 14.6% & 16.6% to Rs 11,03,866 crore & Rs 61,883 crore respectively over FY21-24. Pre-provisioning operating profit is expected to grow at a CAGR of 11.9% to Rs 51,040 crore. NIMs are expected to remain more or less stable over FY21-24 while PAT is expected to grow at 20.4% CAGR to Rs 28,270.2 cr in FY24 as against Rs 16,192.7 crore in FY21.
ICICI Bank stock rating: BUY
Target price Rs 1,024
“ICICI Bank has historically outperformed broader indices by a huge margin given its successful track record. We reinitiate coverage on ICICI Bank with a target price of Rs 1,024 (2.2x FY24 standalone P/B) representing an upside of 47% over the CMP of Rs 697 over 18 months,” Ventura said.
Bull and Bear Case Scenarios
Bull Case: Assuming FY24 AUM of Rs 12,00,000 cr in FY24 (CAGR of 17.8% over FY21-24) and NIM margins of ~4.4% (+80bps over FY21), the result will be a Bull Case price target of Rs 1,392 per share (upside of 100%).
Bear Case: Assuming FY24 AUM of Rs 10,00,000 cr in FY24 (CAGR of 10.9%) and NIM margins of ~3.5% (-10bps over FY21), the result will be a Bear Case price target of Rs 649 per share (downside of 7%).
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