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MOSL: ICICI BANK (Buy)-Growing franchise through technological innovations

ICICI BANK: Growing franchise through technological innovations

(ICICIBC IN, Mkt Cap USD66.2b, CMP INR717, TP INR1000, 40% Upside, Buy)

 

 

We attended ICICIBC analyst day, where the management highlighted how the strengthening of its digital capabilities is helping transform the bank and increase throughput rates, while offering customers a superior experience. The bank is capable of building and scaling digital capabilities like the best of the FinTechs, though agility, constant innovation, and customer focus remains the key to success. ICICIBC has been reporting strong growth in Retail advances, supported by an impressive share of digital originations, while SME/Business Banking growth has been robust, aided by various digital applications. With a resilient asset quality and an improving economic environment (as reflected by key economic indicators – GST collections, GDP growth, and PMI), it appears firmly positioned to deliver healthy sustainable growth. We estimate ICICIBC to deliver ~25% earnings CAGR over FY22-24E, while RoA/RoE improves to 2%/16.6% in FY24E. ICICIBC remains our top pick in the sector. We reiterate a Buy with a SoTP based TP of INR1,000 (2.8x Sep’23E ABV). 

Retail credit: Using technology to drive growth and collections

Data monetization has become a key driver to maximize PPOP growth. The bank is creating use cases across the customer lifecycle, i.e. in acquisitions, deepening relationship, cross sell, and risk management. The bank is making use of digital analytics to segregate customers into pre-approved loans or the pre-qualified category. ICICIBC is using more than 100 variables to assess risk. Pre-Delinquency Management is helping identify early stress. Contactless collection stands ~30% of early stage delinquency. The model is able to predict 80% of the bounce rate, while covering 20% of the book.