X

Reason behind the bull run of ICICI Bank Limited

Post the Pandemic lows of economic activity, the recent fiscal year marked a strong economic recovery. The bank has competently positioned itself in terms of its holdings. With its limited exposure to volatile industries and controllable amount of SME or unsecured retail loans, the institution is in a stronger position relative to its peers. The bank’s asset quality has exhibited resilience and a healthy rate of improvement.

The Net NPA ratio consistently falling and the Provision Coverage Ratio consistently increasing are a testament to the increased asset quality of the bank.

At the end of June 2022, the company’s business had grown at an exponential pace of 17% year over year, with loans seeing an improvement to 21%. Additionally, the domestic advance book had grown at a faster rate of 22% year over year, while the foreign advance book had grown at a faster rate of 14%.

Furthermore, the bank has witnessed increased operating efficiency with the increase in the CASA Ratio. At the end of June quarter, CASA deposits climbed 16% year over year while term deposits increased 11%. The bank’s CASA ratio increased to 46.85% at the end of Q1FY23 from 45.90% a year ago, while falling from 48.70% a quarter earlier.

Net Interest Margins (NIMs), which denotes the surplus of interest income received over the paid interest income, has improved to 4.01% level. Domestic Net Interest Margins are already at high levels of 4.14% due to increased financial stability and a healthy credit to deposit ratio but the international NIMs have remained to low levels of 0.33%. However, with the international interest hikes taking place international NIMs might see an improvement.

Regarding Asset Multiples:

A comparison of global banks across RoA (return on assets) and PB (price to book) in FY23/CY22 shows that ICICI Bank offers among the best risk/reward. It trades at 1.1x on PB/RoA, as its one-year forward core banking PB of 2x is well justified by its RoA of 1.8-1.9 percent, which also has a potential upside risk,”

Jefferies, Global brokerage house

To further examine the bank’s results, check out this link.

Related Post