Some brokerages have backed the bank’s renewed digital thrust and maintained their positive stance on the stock
ICICI Bank Ltd remains committed to transforming itself from a traditional bank into a full-scale technology-driven bank. This was the key takeaway for investors from its analyst day event held on 4 December. The ICICI management presented its industry-first digital offerings for retail and SME/corporate customers and reiterated its strategy of “One Bank, One ROE", and offering 360˚ solutions. The management said customer data in the banking sector has exploded in the past few years driven by factors such as rapid growth in digital payments.
The management also shared some data points. It said 74% of ICICI’s customers are digitally active with retail internet banking (iMobile) and corporate internet banking (InstaBIZ) seeing 19 and 37 monthly logins per user, respectively.
Further, there have been 4.5 million activations in iMobile Pay from non-ICICI Bank customers. In a nutshell, the management highlighted ICICI’s focus on data to maximize operating profits.
An array of brokerages gave a thumbs up to the bank’s increased digital thrust and continued to maintain their positive stance on the stock. For instance, analysts at JM Financial Institutional Securities Ltd said, “We believe ICICI Bank remains at the forefront of technology prowess and adoption among peers."
After a muted reaction on Monday, the stock ended Tuesday’s session up nearly 4% on the NSE. While the laid-out plan is sentimentally positive for the stock, execution of the same and the consequent impact on earnings would be key. A meaningful re-rating of the stock’s valuations depends on these factors, said analysts. On a one-year forward price-to-book basis, the ICICI stock is trading at multiple of 3 times, showed Bloomberg data. This is higher than peer Axis Bank’s 1.9 times and marginally lower than HDFC Bank’s 3.5 times valuation multiple.
“ICICI Bank’s increased focus on digital products and innovations bodes well for investors’ sentiment towards the stock, considering that all banks are now upping their digital game. That said, the real test is to what extent these efforts translate into earnings growth," said Yuvraj Choudhary, research analyst, Anand Rathi Shares and Stock Brokers.
He added that in the last few quarters, under the new management, ICICI has consistently outperformed on several key parameters, resulting in better earnings. This is reflected in the stock’s stellar 44% appreciation in the past year, beating the Nifty Bank index that rose 21% in the same period. “What now remains to be seen is how much more improvement in key earnings metrics can we see on increased digital focus," Choudhary said.
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