ICICI Bank’s Q4FY22 revenue of Rs 70 bn, up 59% y-o-y, was forward of estimate and higher on high quality with 21% y-o-y rise in NII, 19% rise in core op. revenue, low credit score value of 0.5% and ROA at 2.1%. Normalised ROA could be a tad decrease as credit score prices normalise again to 20-25% of op. revenue vs. 11% in This autumn. Ramp-up of SME & retail banking will proceed to help progress and ROA. We maintain ICICIB amongst our prime picks with PT of Rs 1,070. Buy.
Well-rounded efficiency: ICICI Bank’s efficiency in This autumn was spectacular with (i) loans rising by 17% y-o-y/ 6% q-o-q led by SME & retail; (ii) NIM up 16bps y-o-y/steady q-o-q and aiding NII progress of 21% y-o-y and core PPOP progress of 19% y-o-y; (iii) slippages steady at 2.3% of previous 12 months loans (annualised foundation) that led to credit score prices moderating to a low of 0.5% of common loans. Net NPL ratio is at 0.8% and non-NPL burdened loans at 2.4% and buffer-provisions at 1.4% of loans. Fee progress was a tad softer at 14% y-o-y, albeit on normalised base. Growth and margins have additionally been supported by wholesome progress in Casa deposits at 20% y-o-y with Casa ratio rising to 49%.
ROA crosses 2%, however sustainable ROA could also be tad decrease: It is encouraging to see that with a mixture of enchancment in NIMs and discount in credit score prices, ICICI Bank has been in a position to broaden its ROA to 2.1%, which is now corresponding to industry-best ranges. However, on condition that credit score prices throughout This autumn have been considerably under regular (11% of core working revenue vs. steering of 20-25%), we consider that as credit score prices normalise, ROA will transfer in direction of 1.8-2% ranges.
SME would be the subsequent massive alternative: ICICIB has been ramping up its Insta-biz platform for SME enterprise – volumes right here have been up 44% and loans in SME + Business Banking rose by 39%. Its initiatives in online-trade, provide chain financing, EXIM commerce, automated reconciliation and partnerships together with new platforms like OCEN, Account Aggregators, can assist ramp up this phase. We see the phase rising at 25% CAGR over FY22-24 and aiding higher margins and ROA.
Improvement in ROE will drive subsequent leg of rerating: We elevate earnings by 2-3% and as highlighted in a latest report, an enchancment in ROA/ROE will drive the next-leg of re-rating in valuations. We see ICICI Bank delivering 17% CAGR in revenue over FY22-24 and ROE of 16%. We preserve ICICI amongst our top-picks in sector with Buy score and value goal of Rs 1,070 (Rs 1,050 earlier) primarily based on 2.8x Mar-24E adjusted PB; for ADR, our PT is at $28.
Source: www.financialexpress.com”