HDFC Securities see an upside of 25% in the stock of ICICI Bank from the current market price of ₹407 to the target price of ₹503. Motilal Oswal has given a buy rating with a target price of ₹525. HDFC Securities revised its target price upwards from the earlier quoted price of ₹496 and maintains ‘Buy’. “ICICIBC’s 2Q earnings were significantly ahead of estimates, led by better than-anticipated operating performance and lower-than-expected provisions. Like most banks in 2Q, ICICIBC reported a swift improvement in collections and disbursals,” says Darpin Shah, Institutional Research Analyst, HDFC Securities.
On Saturday, the private sector lender ICICI Bank has reported a six-fold year-on-year jump in its September quarter net profit to ₹4,251 crore. The multifold jump in its net profit was led by higher treasury income from sale of investments and a rise in net interest income.
Net interest income (NII) increased by 16% y-o-y to ₹9,366 crore in September-ended quarter of FY21 from ₹8,057 crore in Q2FY20.
Total deposits grew by 20% year-on-year to ₹8,32,936 crore at September 30, 2020 with 17% growth in average current and savings account (CASA) deposits. Term deposits grew by 26% year-on-year at September 30, 2020
Domestic loans grew by 10% year-on-year and 4% quarter-on-quarter at September 30, 2020. Retail loans grew by 13% year-on-year and 6% sequentially.
Gross non-performing assets (GNPAs) dipped 120 bps year-on-year and by 29bps QoQ to 5.2%. “However, this was optical due to (1) the recent SC order, (2) the recent moratorium, and (3) high write-offs (6.1% of opening NPAs),” says Darpin Shah.
Non-tax provisions of the bank dipped around 60.6% QoQ to ₹30 bn, but remained elevated YoY (+19.5%, 1.87% of loans). Incremental COVID-19 related provisions amounted to ₹5 bn, taking the total stock of such provisions to ₹87.72 bn (1.34% of loans).
“We like the prudent approach to provisioning the bank has followed so far. The management expects provisions to normalise in FY22 and stated that normalised provisions would equal ~25% of PPOP. We expect LLPs of 1.9% in FY21E and 1.4% over FY22-23E (31% of PPOP). Lower credit provisions would be the biggest driver of return ratios,” adds Shah.
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