Yes Securities is giving Icici Bank shares a buy tag. See 40% long-term upside
ICICI Bank’s share price has remained negative for the past 6 months. In fact, every rise in the stock over the past 6 months has turned into an opportunity for bears to make money from it. Over the past 6 months, ICICI Bank shares have lost over 11%, while year-to-date (YTD) shares are down around 4%. However, following the private lender’s healthy lending growth trends in retail, SME and corporate banking, Yes Securities believes that bank stocks may soon emerge from the consolidation phase and provide strong upside moves.
The Yes Securities report indicates that the price of ICICI Bank stock could go up to ₹1043 long term levels. ICICI Bank share price today on NSE is ₹736 per share. Thus, the Yes Securities report estimates that the big banks could register an increase of around 40% compared to current levels in the long term.
Highlighting ICICI Bank’s lending growth, the Yes Securities report states, “Management stated that in retail lending, market share in individual micromarkets is not saturated for the bank. Overall retail lending growth (including rural lending) was 5.8% over the quarter. for credit cards, although the renewal rate is still below pre-pandemic levels, there has been a gradual improvement. Credit card fees rose 9.9% quarter-on-quarter, while personal loans rose 10.4% quarter-on-quarter. »
In SME and corporate banking, growth was not driven by the change in note size, but by improved coverage. The growth of SMEs and corporate banking services was respectively 11.3% and 10.2% over one quarter. When it comes to business lending, the bank is missing out on opportunities where it sees inappropriate pricing. Corporate lending was relatively slower than the rest of the bank, growing 3.4% quarter-on-quarter.
Suggesting that ICICI Bank management think about “improving loan mix,” Yes Securities said: “Impact of income tax refund was 1bp in 4QFY22, 6bp in 3QFY22 and 1 bp at 4QFY21 The fourth quarter has traditionally seen an improvement of 8-10 basis points due to the difference in the number of days and other factors.Therefore, the basic net interest margin remained stable sequentially after taking into account the impact of the income tax refund. Management said the cost of deposits bottomed out. While the yield on the existing portfolio may increase, the incremental yield will also have Above all, we see the composition of loans evolving positively for ICICI.
The brokerage said it values the standalone bank at 3.1x FY23 P/BV for an FY23E/24E RoE profile of 15.8/16.6%. We assign a value of ₹174 per share to subsidiaries, on SOTP.
On its suggestion to positional investors regarding ICICI Bank shares, the Yes Securities report said, “We maintain a ‘Buy’ rating on ICICI with a revised price target of ₹1043.”
Warning: The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.