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Business News/ Markets / Stock Markets/  ICICI Bank share price jumps over 5% to 52-week high after Q3 results; should you buy?
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ICICI Bank share price jumps over 5% to 52-week high after Q3 results; should you buy?

ICICI Bank saw the healthy credit growth enduring in Q3 too, but interest reversal on KCC loans and rising funding cost led to a 10 bps QoQ and 22 bps YoY margin normalization to 4.4%.

ICICI Bank shares gained 5.86% to a 52-week high of ₹1,067.40 apiece on the BSE. (Photo: Bloomberg News)Premium
ICICI Bank shares gained 5.86% to a 52-week high of 1,067.40 apiece on the BSE. (Photo: Bloomberg News)

ICICI Bank share price gained over 5% in early trade on Tuesday after the private sector lender reported Q3 results in-line with street estimates. ICICI Bank shares gained 5.86% to a 52-week high of 1,067.40 apiece on the BSE.

The second largest private lender in India, ICICI Bank posted a net profit of 10,271.54 crore for the third quarter of FY24, registering a 23.5% rise from 8,312 crore in the year-ago period.

The bank’s net interest income (NII) in Q3FY24 increased 34.6% to 16,465 crore from 12,236 crore, YoY. The net interest margin (NIM) during the December quarter improved to 4.65% from 3.96%, YoY, and 4.31% in the September quarter.

Read here: ICICI Bank Q3 Results Highlights: Net profit rises 23.5% to 10,272 crore, NII up 13% YoY

ICICI Bank continued to outpace systemic credit growth at 18% YoY and 4% QoQ, mainly led by strong retail and SME growth.

Analysts are bullish on ICICI Bank with some brokerages raising target price on the stock due to its strong performance and as they believe the bank is well-positioned among other large private sector lenders. Here’s what brokerages have to say on ICICI Bank Q3 results and ICICI Bank stock price:

Emkay Global Financial Services

ICICI Bank saw the healthy credit growth enduring in Q3 too, but interest reversal on KCC loans and rising funding cost led to a 10 bps QoQ and 22 bps YoY margin normalization to 4.4%. We believe margins would continue normalizing for most banks, as also for ICICI Bank, on rising funding costs. However, better cost management and strong provisioning buffer (1.1% of loans) should help the bank deliver superior RoA of 2.2-2.4% and RoE of 18-19% over FY24-26E, Emkay Global Financial Services said.

ICICI Bank remains a preferred pick of the brokerage firm in the banking space, given its superior returns profile, top-management credibility, and strong capital/provision buffers. 

It retained a ‘Buy’ rating on the stock and raised the target price to 1,400 per share from 1,375 earlier.

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Elara Securities

ICICI Bank delivered steady Q3, reflected in resilient earnings delivery. Core profitability (ex-treasury) growth was below trend (up 10% YoY), but curtailed credit cost helped >20% YoY earnings growth, as expected. ICICI Bank has started to tilt towards the narrative of core operating profit less provision growth from risk-calibrated core PPoP growth, said Elara Securities. 

According to the brokerage, while banking may be facing strain, ICICI Bank may hold against the tide with steady earnings – FY24E ROA and ROE of more than 2% and 16%. With merger-related uncertainties for HDFC Bank, it believes ICICI Bank is a clean play on best-in class-RoA. 

ICICI Bank should trade at a premium on high-quality granular earnings, said the brokerage as it maintained a ‘Buy’ call on the stock and raised the target price to 1,214 per share from 1,192 earlier. ICICI Bank is its top sectoral pick.

Also Read: Zee share price tanks 10%, hits lower circuit as Sony calls off merger; brokerages downgrade stock 

Kotak Institutional Equities 

Kotak Institutional Equities maintained a ‘Buy’ rating on ICICI Bank and raised the target price to 1,220 per share from 1,150 earlier. ICICI Bank remains the brokerage’s top pick. It values the bank at ~2.6X book and 18X FY2026E EPS for RoEs comfortable at ~15% levels. 

The price performance has been a bit disappointing despite the bank delivering strong earnings performance. The challenge is relative in nature. ICICI Bank is trading at peak valuation in our coverage universe (not as compared to its history) among large banks. ICICI Bank would have to deliver superior returns that are sustainable in nature in the medium term to command a higher premium, said Kotak Institutional Equities.

It believes the key areas where the bank could deliver can be on NIM, which at this stage, is on a decline. We are yet to see the bottom of this NIM contraction cycle. On the other hand, we don’t think the levers are too different on credit costs, loan growth and operating efficiencies, it added.

InCred Equities

InCred Equities have valued the standalone ICICI Bank at ~2.5x FY25F BV (relative discount to HDFC Bank at ~2.7x) and its arms at 200 per share. It has retained its estimates and kept the target price intact at 1,150 per share or ~3.1x FY25F BV. It has also retained its ‘Add’ rating on the stock. 

The brokerage feels that HDFC Bank is better placed than ICICI Bank on the growth (due to improved reach) and profitability (improved operating leverage) fronts. It expects HDFC Bank to post ~26.1% PAT CAGR over FY23F-26F against ICICI Bank’s ~15.9%.

At 9:20 am, ICICI Bank shares were trading 3.56% higher at 1,044.15 apiece on the BSE.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions. 

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Published: 23 Jan 2024, 09:22 AM IST
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