PL Stock Report: ICICI Bank (ICICIBC IN) - Q2FY24 Result Update - Full year NIM for FY24E to be similar to FY23 - BUY

ICICI Bank (ICICIBC IN) - Gaurav Jani - Research Analyst, Prabhudas Lilladher Pvt Ltd.

Rating: BUY | CMP: Rs933 | TP: Rs1,280

Q2FY24 Result Update - Full year NIM for FY24E to be similar to FY23

Quick Pointers:

§ Core PAT beat of 15% given better NII/fees and lower opex/provisions.

§ Asset quality surprises positively with lesser GNPA due to stronger recoveries.

ICICIB delivered good numbers yet again with core PPoP at Rs130bn beating PLe by ~7% led by superior core revenue. GNPA was lower led by lesser net slippages which resulted in benign credit costs. Loan accretion at 5.0% QoQ was ahead, driven by growth in high yielding segments (PL/CC, SME, auto). Although NIM declined by 21bps QoQ to 4.83%, it was 13bps ahead of PLe due to better treasury management and lower funding cost. Bank expects NIM for FY24E to be similar to FY23. We raise FY24/25/26E core PAT by 3.0-4.0% due to NII increase and lower provisions. Likely RoA/RoE for FY25/26E is 2.0%/17.0%. ICICIB is valued at par with HDFCB at 2.2x/1.9x on FY25/26E core ABV; with recent correction in ICICB it should outperform HDFCB in near term. Maintaining multiple at 3.0x, as we roll forward to Sep’25 core ABV, we raise SOTP based TP to from Rs1180 to Rs1280. Reiterate ‘BUY’.

§ Good quarter; core PPoP beat led by better NIM/fees and lower opex: NII was ahead at Rs183.1bn (PLe Rs177.4bn) led by better NIM and loan growth. NIM (calc.) was a beat at 4.83% (PLe 4.7%), -21bps QoQ due to better treasury management. Loan growth was higher at 18.3% YoY (PLe 17.2%). Deposit accretion at 18.8% YoY was better than expected (PLe 18.0% YoY). Other income too was ahead at Rs57.8bn (PLe Rs55.0bn) driven by higher fees and dividend income. Opex was lower at Rs98.6bn (PLe Rs99.6bn) led by softer staff cost. PPoP was a beat at Rs142.3bn (PLe Rs132.8bn); core PPoP at Rs143.0bn was 6.9% ahead of PLe. Asset quality was better; GNPA was 2.53% (PLe 2.68%) due to lower net slippages; NNPA was 0.44%. Provisions were lower at Rs5.8bn (PLe Rs14bn). PAT was Rs102.6bn (PLe Rs89.1bn) while core PAT was 15% ahead of PLe.

§ Overall loan growth of 5.0% QoQ: Domestic loan growth was 4.8% QoQ led by retail (5.5%), BuB (10.6%), SME (7.2%). Corporate grew by 3.1% QoQ driven by growth in well rated companies from sectors like NBFCs, HFCs and real estate. Apart from housing retail growth was led by vehicle (auto+CV) and unsecured (PL+CC) which saw rapid accretion of 9.0% QoQ. Bank is confident of credit quality in unsecured as exposure to small ticket portfolio is marginal. Deposit growth (+4.5% QoQ) was mainly led by TD (+9.2% QoQ) while CASA de-grew by 1.6%. CASA ratio dipped to 40.8% from 43.3% in Q1’24. Bank would like to maintain proportion of retail TD at 75-80% of total TD.

§ Upgrade in FY24E NIM; strong recoveries resulted in better asset quality: Lower funding cost in Q2’24 at 5.05% (PLe 5.2%) also drove higher NIM. Bank expects CoF to rise for another quarter but sees full year NIM for FY24E to be stable (vs FY23). We further raise NIM for FY24 by 3bps to 4.45% (vs 4.38% in FY23). On asset quality, while gross slippages were Rs46.9bn (PLe Rs45bn) recoveries were Rs45.7bn (PLe Rs36bn) due to a bulky corporate recovery (Rs15.5bn). Buffer provisions were intact at Rs131bn or 1.2% of loans.

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