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MOSL: ICICI BANK: Invest and Admire – setting industry benchmarks (ICICIBC IN, Mkt Cap USD69.7b, CMP INR800, TP INR1050, 31% Upside, Buy)

• ICICI Bank keeps on raising the benchmarks with exemplary performance every quarter. We cannot help but admire how the bank has consistently delivered industry leading performance amid a challenging period.
• What looks to be a picture perfect performance in one quarter only adds more colors in the ensuing quarter. Our conviction in the bank remains strong and we believe that the journey is likely to get even more exciting in the coming years.
• Over the last couple of quarters, due to intense FII selling, the bank’s absolute performance has been limited; however, with flawless execution it is only a matter of time that ICICI’s valuation will expand to its deserving multiple, thus generating supernormal returns for investors.
• We estimate ICICIBC to deliver a FY24 RoA/RoE of 2.1%/17.1%. ICICIBC remains our top pick in the sector.

Sublime performance continues!

• PAT grew 50% YoY (7% beat to MOSLe) to INR69b in 1QFY23, aided by healthy NII growth, strong fee income, and controlled provisions. The bank reported an annualized RoA/RoE of 2%/15.9% in 4QFY22.
• NII growth stood at 21% YoY (in line), aided by a 2bp QoQ expansion in domestic NIM to 4.14% and healthy loan growth of 21%.
• Other income rose 17% YoY, but fell 2% QoQ to INR46.7b. Growth was led by a 32% YoY increase in fee income, driven by healthy performance across segments. The bank reported modest treasury gains of INR0.4b (INR1.3b in 4QFY22). A lower duration AFS portfolio minimized the MTM impact in 1QFY23.
• OPEX rose 25% YoY (7% miss) as the bank continues to invest in its employees and in tech initiatives to build the franchise. PPOP rose 16% YoY. Core PPOP grew 19% YoY (up 21% YoY excluding dividend income).
• On the business front, advances grew 21% YoY and 4% QoQ, led by 22%/22% YoY growth in domestic/Retail loans. Growth was led by Home loans, Credit Cards, and Personal loans. The SME book grew 32% YoY, but fell 3% QoQ. The Corporate book is reviving with a 14% YoY increase.
• On the liability front, deposits grew 13% YoY, but fell 2% QoQ. CASA deposits grew 16% YoY, but fell 5% QoQ. Average CASA mix improved by 60bp QoQ to 45.8%.
• Fresh slippages rose to INR58.3b (2.7% annualized). However, higher recoveries restricted increase in net slippages to INR3.8b.
• GNPA/NNPA ratio contracted by 19bp/6bp QoQ to 3.41%/0.7%. PCR ratio was broadly stable ~80%.
• Despite the creation of additional contingent provisions of INR10.5b, provisions moderated by 60% YoY. With this, the contingency buffer stands at INR85b, or 0.9% of loans.