ICICI Bank Earnings Preview: Investors Should Watch out for Digital Initiatives

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India’s second-largest private sector bank by assets—ICICI Bank Limited will release its second-quarter fiscal 2022 earnings on October 23 after market hours. On October 21, the stock opened on Rs 748.90 and touched a high of Rs 759.85, and saw a low of Rs 737.40 on NSE. The scrip closed on 758.2, up 1.66% on the previous day’s close of Rs 745.85. Notably, the share closed up for the third consecutive day. The stock’s intra-day high of Rs 759.85 remained its 52-week high.

Q2FY2022 expected performance

A bank’s performance is measured by its liability growth, asset quality, cost of funds, improvement in collections, and a decline in overdue. ICICI Bank (NS: ICBK ) has reported solid growth in CASA (current account/savings account) year-on-year in the past quarters. During lockdowns of the first quarter, its CASA growth in rupee terms was 24.8% y-o-y, where current account growth was 23.7% whereas savings account growth was 25.2%. With the opening-up of market activities in the second quarter, the bank is expected to report strong growth on the CASA front. The bank's cost of deposits was 3.65% in the first quarter which is likely to come down further in the second quarter.   

ICICI Bank’s stable mix of high-yielding loan verticals such as business and retail loans, steady increase in low-cost liability, and deployment of excess liquidity is likely to contribute to its margin. Its return on equity and return on assets is anticipated to improve to 15.3% and 1.8% respectively for FY2023E. The bank’s core income and net interest margin (or NIM) is expected to show improvement in the second quarter on a quarter-on-quarter as well as a year-on-year basis. ICICI has displayed broad-based growth across product categories which augur well for its overall growth.

ICICI Bank’s asset quality

The overdue in the performing portfolio across various segments increased in April and May on account of the Covid-19 pandemic’s second wave. However, with the easing of restrictions and pickup in economic activities, the overdue across various segments of the performing portfolio are expected to decline in the second quarter and ahead. We expect further improvement in collections and a decline in overdue in the subsequent quarters of fiscal 2022. In fact, the decline in collections in the gold loan portfolio shouldn’t come as a matter of concern due to the mortgage of customers’ gold with the bank. A surge in gold prices should provide a strong cushion going forward.

The bank wrote back floating provisions worth Rs 1,050 crore in the first quarter of fiscal 2022. Simultaneously, it increased provisions toward retail NPAs by Rs 1,200 crore. The bank has witnessed a remarkable improvement in business and financial parameters, apart from heading in the right direction during the pandemic times. It has guided for lower gross NPA additions in Q2FY2022 with a meaningful fall likely to happen from the second half of fiscal 2022 onwards. Improving return ratios, robust capital base, and conservative provisioning augur well for ICICI Bank.

Investors should keep a close watch on the pace of digital initiatives undertaken by the bank in the July-September 2021 quarter. The digital and other business initiatives include new client acquisition, InstaBiz app downloads, iMobile Pay’s activation from non-ICICI Bank customers, issuance of new credit cards, active app users, and app downloads.   

Analysts’ price target

Chandan Taparia of Motilal Oswal (NS: MOFS ) has a ‘buy call on ICICI Bank with a target price of Rs 760. Sharekhan is also bullish with a ‘buy recommendation and a target price of Rs 876. Macquarie Securities upgraded its price target on the bank to Rs 820 per share. Jefferies has a price target of Rs 780 on the share. Bernstein, an equity research firm, increased its price target to Rs 790 per share from Rs 610, quoting ICICI Bank's improving technological prowess.

Investec Capital Services also raised its target price to Rs 790 per share from Rs 715 per share earlier. HSBC Global Research too raised the price target to Rs 800 per share from Rs 700 per share earlier. Nomura, a renowned brokerage and research firm increased its price target to Rs 790 per stock from Rs 690. Credit Suisse (SIX: CSGN ), raised its target price for the bank’s share to Rs 740 from Rs 660. All the 50 analysts tracking the stock recommend a ‘buy’ on ICICI Bank stock.  
ICICI
What technical indicators suggest

ICICI Bank stock appears good based on key technical parameters such as RSI, Momentum, MACD, and 10-day/20-day/30-day/50-day/100-day/200-day EMA. 

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  • Tr Surendhar @Tr Surendhar
    Digital initiative is good parameter to check thank for your knowledge sir, I am going to buy icici and bob
    Like 1
  • Tr Surendhar @Tr Surendhar
    Thank u sir
    Like 0
  • Pes Wtf @Pes Wtf
    sir I follow your levels everyday, could you please take some time to share some of your fine views on my favourite stock COSMO FILMS. I want to buy it for a long term, but not sure about perfect levels. thanks in advance guruji.
    Like 1
    • Sameer Padole/Investing.com @Sameer Padole/Investing.com
      @Pes Wtf I haven't heard of this stock before. Sure, I will.
      Like 1
    • Pes Wtf @Pes Wtf
      sure guruji, I guess it is a plastic/packaging related stock and price is around 1500
      Like 0
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