Motilal Oswal retains ‘buy’ on ICICI Bank; sees over 16% upside

The bank continues to see a strong growth in retail deposits and has successfully maintained a robust liability franchise, Motilal Oswal said.

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ICICI Bank is making steady progress towards sustainable growth amid strong contingency buffers as well as robust underwriting and risk-monitoring mechanisms, brokerage firm Motilal Oswal said in a report. Retaining its ‘buy’ rating on ICICI Bank, Motilal Oswal has given a target price of Rs 1,150 for the stock, which represents a potential upside of over 16 percent from its current level of Rs 985. In a note on ICICI Bank’s Annual Report for 2022-23, Motilal Oswal said the lender further strengthened its retail franchise with the segment registering 23-percent YoY growth (18 percent YoY growth in home loans).

“ICICI Bank remains focused on building a diversified and granular portfolio, and saw healthy growth across Retail, SME, and Business Banking portfolios. The bank also witnessed a recovery in its corporate book, which grew 19 percent YoY in 1Q FY24,” it added.

The bank continues to see a strong growth in retail deposits and has successfully maintained a robust liability franchise.

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Total deposits/CASA (current accounts savings accounts) clocked 16 percent and 13 percent CAGR over FY18-23. CASA ratio has declined to 45.8 percent in FY23, due to higher growth in term deposits. CASA is a key source of low-cost funds for banks.

“The growth in its deposit franchise was supported by continuous efforts to strengthen its digital platforms and simplify processes to provide a seamless banking experience to customers. While its liability franchise stands strong, the management intends to maintain a healthy and stable funding profile to deliver benefits on the cost of funds,” Motilal Oswal added.

Aslo Read: RBI approves re-appointment of Sandeep Bakhshi as ICICI Bank MD & CEO

Strong traction

ICICI Bank’s Tier-I ratio stood healthy at 17.6 percent, while it has also made significant progress toward improving its asset quality, with the best-in-class Provisioning Coverage Ratio of 83 percent. PCR refers to the percentage of funds that a bank sets aside for losses due to bad debts.

Motilal Oswal further said that the bank’s subsidiaries –– ICICI Prudential Life Insurance, ICICI Lombard General Insurance, ICICI Securities, and ICICI Prudential AMC –– too reported healthy numbers for FY23.

“The bank is witnessing strong traction across key segments such as Retail, SME, and Business Banking. Asset quality trends remain steady, while additional COVID-19 provision buffer (1.2% of loans) renders further comfort,” it noted.

Shares of ICICI Bank are up 9 percent this year till date, compared to 5 percent rise in Nifty Bank index.

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