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.

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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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