ICICI Bank shares zoom over 6% after net profit jumps to over 6 times, collection efficiencies improve

Private sector lender ICICI Bank’s share price zoomed over 6% on Monday morning making it the top Sensex gainer in a volatile market. Investors reacted to the strong quarterly performance reported by ICICI Bank where the lender reported a massive 549% jump in net profit from the previous year owing to lower base. The jump was helped by a double-digit growth in non-interest income. ICICI Bank is one of the largest banks in the country with a strong credit profile. Shares of the bank have zoomed 45% since March this year.  Currently the stock trades at Rs 410 per share.

Analysts at Kotak Securities term ICICI Bank as one of their top picks. ICICI Bank kept coronavirus provisions at 1.3% which is being seen as a positive for normalization of credit costs. Loan growth was strong for ICICI Bank at 6% on-year basis while fee income was 50% higher the previous quarter. “We maintain our BUY rating on the bank with FV revised to Rs 500 to reflect changes to near-term earnings as the bank is guiding to a normalized credit cost for FY2022,” Kotak Securities said in a note. 

Deposits for ICICI Bank grew 20% from the previous year. Retail and lending to the small and medium enterprises registered growth during the quarter. Slippages were muted in the July-September quarter mainly on account of the asset classification standstill for the portfolio under moratorium. LKP Securities noted that the bank alluded to collection efficiencies at ~97% of Pre-COVID level. “We expect its loan book to fatten cautiously at a CAGR of 10% over FY21-23E, led by balanced growth across segments,” they added. However, despite this, analysts at LKP Securities see the stock price zooming to Rs 471 per share, hence they give a ‘Buy’ call.

ICICI Bank is one of the leading banks in the country. With strong collection efficiency and only 3% of loans in overdue status, the bank is comfortably placed on the asset front. “While a focused approach and structural changes underpin the bank’s sustainable re-rating, at current combination of safety-cheapness-recovery gearing, it appears the lowest hanging fruit,” said Edelweiss Securities. The brokerage firm has a 12-month target price of Rs 650 per share for ICICI Bank.