IIFL Institutional Equities, a part of the IIFL Group, one of the leading players in the Indian financial services space, recommends ‘Buy’ on ICICI Bank.
The bank’s net profit in Q1FY12 came in higher than IIFL’s estimates at Rs 13.32 bln, up nearly 30% on year, a recent report by the brokerage showed.
Higher than estimated NIM and sharper than expected decline in loan loss provisions due to stronger decline in delinquency levels, were key positives while slow fee income growth, which led to dull revenue and pre-provision profit growth, surprised on the negative side, the report said.
“We upgrade our earnings estimates by 5-6% for FY12ii-14ii, on the back of higher NIM than previously expected. Strong pricing power and reduced dependence on wholesale deposits would likely drive NIM higher over the medium term,” IIFL said.
The brokerage expects robust growth in franchise earnings and visibility on improving ROE over the medium term to lead to a re-rating of ICICI Bank.
The report was published by IIFL’s Institutional Equities Research desk.