Sharekhan is optimistic about ICICI Bank and suggests buying the stock with a target price of Rs 1450, according to their report dated July 27, 2024.
Key Points from Sharekhan’s Report on ICICI Bank:
- Earnings Performance: Core earnings met expectations, but reported earnings were higher due to increased treasury gains and other income. This resulted in a stable return on assets (RoA) at around 2.36%.
- Core PPoP Growth: Excluding treasury gains and dividend income, core pre-provision operating profit (PPoP) grew by 7% year-on-year, which was anticipated.
- Credit Costs: Stayed low, contributing positively.
- Asset Quality: Remained stable overall, with some seasonal variations in the agricultural portfolio.
- Deposit vs. Loan Growth: Deposit growth (1% quarter-on-quarter) was lower than loan growth (3% quarter-on-quarter). The bank noted that competition for deposit rates is high and will adjust pricing based on need and maturity outflows, with the credit-deposit (CD) ratio still reasonable at around 86%.
- Competitive Position: ICICI Bank is well-positioned among large private banks, despite a gradual normalization of its business metrics.
Outlook:
Sharekhan maintains a Buy rating for ICICI Bank with a revised target price of Rs 1450. The stock is trading at 2.5x and 2.1x its estimated book value for FY2025 and FY2026, respectively.
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