Target: ₹1,310
CMP: ₹999.20
ICICI Bank’s PAT/PPoP was 8/4 per cent above BNPP estimates primarily on account of lower-than-expected opex and credit costs. The Cost-to-income ratio remained stable at 40.6 per cent, down 30 bps q-o-q due to lower employee additions in 3Q while other opex costs were driven by digital and technology expenses.
Credit costs were just 37 bps despite 22 bps provision for AIF investments, buffered by utilisation of excess provisions made earlier. Calculated NIM of 4.52 per cent fell 14 bps q-o-q mainly because of a rise in costs of funds by 21 bps. Management expects NIM to moderate further in Q4 and FY24 margin to be the same as that in FY23.
CASA growth, at 3.8 per cent y-o-y/0.1 per cent q-o-q, has really been tepid for the last three quarters with the entire growth being driven by term deposits growth of 31% y-y/c5% q-q. This is lower than that of its nearest competitor HDFC Bank and is seen in its rising cost of funds, driven by repricing of TD which management expects to happen till Q1-FY25.
We think ICICI Bank’s current valuation of 2.3x 1-yr forward core BVPS does not fully reflect the low-risk 16-17 per cent steady-state ROE it can deliver. We retain Buy and note the attractive promise of perhaps the highest predictability of earnings in the sector.
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