ICICI Bank Share price: Sharekhan maintains Buy rating on ICICI Bank with price target of Rs 770
Sharekhan interacted with the ICICI Bank management wherein it highlighted that it remained committed to sustainable growth with a sharp focus on core profitability supported by a healthy asset quality position. The loan growth is expected to pick-up gradually through Q4 and FY22E, and we expect the trend of lower asset quality pressure (on an incremental basis) to continue.
Sharekhan interacted with the ICICI Bank management wherein it highlighted that it remained committed to sustainable growth with a sharp focus on core profitability supported by a healthy asset quality position. The loan growth is expected to pick-up gradually through Q4 and FY22E, and we expect the trend of lower asset quality pressure (on an incremental basis) to continue. The bank expects NIMs to stay steady with an upward bias (supported by loan growth, lower slippages and interest reversals drag) for the medium term. ICICI Bank share price closed yesterday at Rs 574, down Rs 14 or 2.2%
Also, Sharekhan believes that the competitive intensity notwithstanding, ICICI Bank may be able to offset the same through a calibration in its loan mix towards better yielding products, higher loan-to-deposit ratio and also better than ever liability franchise. While segments (like retail. mortgages etc) continue to see high competitive intensity, but given ICICI Bank’s strength of franchise, its likely to sustain its growth. The retail backed robust liability franchise of ICICI Bank, with CASA at 42% places it well in terms of low cost of funds.
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Going forward with a high-quality asset book it is well placed to benefit from the long term opportunity without a drag on asset quality. NIMs had improved in Q3 FY21 to 3.67% (up 10BPS qoq) indicating the strength of the liability book and business franchise. ICICI Bank has a strong asset quality position, with the bank front-loading provisions (on a proforma basis) which resulted into a strengthened balance sheet and provides impetus to growth in FY22E and FY23E.
ICICI Bank’s strong capital position with a CET-1 ratio of 16.79% including profits for 9MFY21 gives it a springboard for growth. Looking ahead, we believe that optimism in the economy supported by indicators of resumption in economic activity and continued growth in digitisation and the bank’s extensive franchise, high-quality digital platforms and solutions, its prudent risk management practices with strong capital ratios puts it in a good position to capture opportunities that will arise in the near and medium term.
Sharekhan believes that improved economic growth (helped by a progressive and growth oriented government policy and Union Budget) are positives for the banking sector, and strong players like ICICI Bank are well-placed to benefit from it. Sharekhan maintains a Buy rating on ICICI Bank with an unchanged SOTP-based price target of Rs 770.
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