Equity Research Report - ICICI Bank Limited

Summary

ICICI Bank is a large private sector bank in India offering a diversified portfolio of financial products and services to retail, SME and corporate customers. The Bank has an extensive network of branches, ATMs and other touch-points.

Company Profile:

ICICI Bank Limited (the Bank) is a banking organization. The Bank is engaged in providing various banking and monetary offerings which includes industrial banking and treasury operations. The Bank's business segments are Retail Banking, Wholesale Banking, Treasury, and Other Banking. The Bank provides various products, which includes savings account, women's account, senior citizen account, current account, credit cards, home mortgage, personal mortgage, vehicle loan, gold loan, fixed deposit, recurring deposit, life coverage, and general coverage. It provides a variety of Internet banking offerings, which includes paying bills, raising carrier requests, and making transfers. It also offers a number of cellular banking services, which incorporates iMobile Pay, short message service (SMS) banking, Call to Pay, and instant price carrier (IMPS). Its popular coverage merchandise include medical insurance, travel coverage, domestic insurance, wheeler insurance, and vehicle coverage.

Branch Network
Presently, the bank operates a network of 5,300 branches and 15,200 ATMs across India. 30% of its branches are located in metro cities.

Industrial Exposure
The bank has diverse exposure to various industries. Top industries include services - finance (10%), banks (7%), crude petroleum (5%), electronics (5%), infrastructure (4%) and others. This is compared as a % of total exposure of the bank.

International Business
ICICI Bank’s international presence consists of operations in the USA, Singapore, Bahrain, Hong Kong, Dubai, China, UK, Canada and Germany. It operates in Canada, UK and Germany through its wholly owned subsidiaries. International advances account for 11% of total consolidated advances of the bank.

Market Statistics:

Market Cap  : ₹ 583294 Cr.

Current Price: ₹ 838.2

52W High : ₹ 867

Stock P/E : 21.0

Book Value : ₹ 272.1

Dividend Yield : 0.6%

P/B : 3.1

Face Value  2

52W Low :₹ 642

Source: www.sharescart.com

Returns(%):

Source: www.bseindia.com

Shareholding Pattern(%):

Source: www.sharescart.com 

Peer Comparison : 

Source: www.sharescart.com

Growth Drivers: Key highlights for Q1-2023 

Core operating profit:

• Growth of 19.4% y-o-y to ` 102.73 bn
• Excluding dividend income from subsidiaries, core operating profit grew by 21.1% y-o-y

Deposits:

• Average current account deposits increased by 23.0% y-o-y and 2.9% sequentially in Q1-2023

• Average savings account deposits increased by 19.1% y-o-y and 4.4% sequentially in Q1-2023

• Period-end term deposits grew by 11.4% y-o-y at June 30, 2022

Advances:

• Domestic loans grew by 21.7% y-o-y • Retail loans grew by 24.4% y-o-y

• Rural loans grew by 8.4% y-o-y

• Business banking portfolio grew by 44.7% y-o-y

• SME portfolio grew by 32.3% y-o-y

• Domestic corporate portfolio grew by 14.4% y-o-y 

Asset quality:

• Net NPA ratio declined to 0.70% at Jun 30, 2022 from 0.76% at Mar 31, 2022 and 1.16% at June 30, 2021

• Net additions of ` 3.82 bn to gross NPAs in Q1-2023 (Q4-2022: net deletions of ` 4.89 bn)

• Total provisions of ` 11.44 bn in Q1-2023 (0.53% of average loans, 11.1% of core operating profit)

• Includes contingency provision of ` 10.50 billion made on a prudent basis

• Provision coverage was 79.6% at Jun 30, 2022 (Mar 31, 2022: 79.2%)

• Fund based o/s of ` 73.76 bn (0.8% of advances) to all standard borrowers under resolution; provisions of ` 22.90 bn held against these borrowers

• Contingency provisions of ` 85.00 bn at Jun 30, 2022

Profit after tax and capital:

• Profit after tax grew by 49.6% y-o-y to ` 69.05 bn in Q1-2023

• Common Equity Tier 1 ratio of 17.23%

Source: Q1-2023: Quarterly Earning PResentation

P&L trends: Q1-2023:

Net interest margin (%):

4.01 in Q1-2023 (Q4-2022: 4.00; Q1-2022: 3.89)

Fee income:

Growth of 31.8% y-o-y to ` 42.43 billon

Core operating profit to average assets (%):

2.95 in Q1-2023 (Q4-2022: 3.06; Q1-2022: 2.88)

Provision to core operating profit (%):

11.1 in Q1-2023 (Q4-2022: 10.5; Q1-2022: 33.1)

Profit after tax:

Growth of 49.6% y-o-y to ` 69.05 billon

Portfolio of overseas branches: (Total outstanding1 at Jun 30, 2022: USD 3.54 billion).

The overseas non-India linked corporate portfolio reduced by 52.8% year-on-year or about USD 513 million and 28.6% sequentially or about USD 183 million at Jun 30, 2022.

Source: Q1-2023: Quarterly Earning PResentation

Diversified and granular loan book:

Breakup of loan portfolio1 at Jun 30, 2022

Retail portfolio largely secured and built on proprietary data and analytics in addition to bureau checks and well-priced in relation to risk 1. Proportions are gross of BRDS/IBPC 2. Includes dealer funding, loan against shares and others 3. Including non-fund based outstanding, the share of retail portfolio was 44.0% of the total portfolio at Jun 30, 2022 2 Focus on granular exposures and higher rated corporates; provide full suite of banking products to corporate clients and their ecosystems.

Source: Q1-2023: Quarterly Earning PResentation

Financial Snapshot (Rs. in Crores)

Balance Sheet ((Rs. in Crores)

Profit and Loss Account (Rs. in Crores):

Cash Flow Statement (Rs. in Crores):

Source: www.sharescart.com

Conclusion : 

on the basis of the discount cash flow valuation method we are recommending 'Buy' for the stock. Since the stock  offers good opportunity, we initiate a 'Buy' signal on the stock with 12 month price target of Rs. 972/- share an upside of 15.99% from current levels.