Q3FY23 Review: ICICI Bank: Another strong quarter

23 Jan 2023 , 12:34 PM

ICICI Bank reported profit of Rs83.1 billion for Q3FY23 which was above the estimates of IIFL Capital Services, mainly driven by sharp margin expansion. Core PPOP grew 34% YoY / 14% QoQ. Reported RoA stood at 2.2%, despite further buildup in contingency provisions and a conservative policy change on NPA provisioning. Healthy loan growth, sharp NIM expansion and sustained asset quality performance were the key positives. 

On the flip side, fee- income traction in the quarter was weaker than expected. Branch additions have picked up over the last four quarters with ~105 branches added on an average; however, the pace remains below its larger private peer. 

ICICI Bank has posted strong operating performance with 20%+ YoY core PPOP growth over the last eight quarters. Domestic CD ratio — at ~85%— is at the higher end of historical range; focus would be on increasing deposit growth to fund loans. While NIM should peak-out in FY23, ICICI Bank has sufficient levers to maintain profitability.

Analysts at IIFL Capital Services have increased their earnings estimates by ~1-2% over FY23-25 and expect ICICI Bank to deliver core RoA/RoE of 1.9/17.1% by FY24. 

They have maintained their Buy recommendation on the stock, with an SOTP-based target price of Rs1,140.