Why Brokerages Raised Price Target On ICICI Bank
Customers standing in queue outside ICICI Bank Nerul branch. (Photo: BloombergQuint) 

Why Brokerages Raised Price Target On ICICI Bank

Shares of ICICI Bank Ltd. jumped to the highest in nine months after analysts raised their target prices for the private lender, citing prospects of delivering sustainable growth, adequate investments in digital platforms and improved return ratios, among others.

Data analytics will be key drivers to enhance the risk calibrated operating profit of the bank, it said at an analyst meeting on Friday as the private lender showcased digital strategy of each business segments while reiterating its narrative of ‘One Bank, One RoE and One KPI (key performance indicator)’.

Outages on digital platforms can happen with anyone, it said, adding disaster management to quickly resolve the impact is important.

Some key highlights of the management commentary compiled from brokerage reports are…

  • Focus on micro-market and cost optimisation
  • Increasing focus towards NRI Banking; sees huge growth opportunity
  • Strategy to service segments beyond agriculture in the rural market
  • Expects corporate restructuring to be less than 100 basis points
  • Business banking segment remains significantly underpenetrated
  • Seeing strong demand recovery in consumption loans
  • Disbursements in secured loans have surpassed pre-Covid levels

That also prompted analysts to maintain their bullish investment recommendation on ICICI Bank. Some even termed the lender as one of their top picks in the private banking space. All the 54 analysts tracking ICICI Bank have a ‘buy’ rating on the stock. The average of Bloomberg consensus 12-month target price implies an upside of 10.4%.

Shares of ICICI Bank ended with gains of 1.6% to Rs 510.4 apiece—the highest since March 3, 2020. The stock gained for the third straight session.

Here's what analysts had to say:

Jefferies

  • Maintains ‘buy’ rating; raises price target to Rs 600 from Rs 570 apiece
  • Bank is approaching clients with product suites and not just products
  • Ecosystem banking is a key focus area
  • Business is getting better and provisions are adequate
  • Management says H2FY21 should see higher downgrades and Covid restructuring for corporate/SME loans would be almost 1% of total loans
  • Sees earnings recovery from FY22 with improved growth and lower credit costs

Ambit

  • Maintains ‘buy’ rating; hikes price target to Rs 570 from Rs 507 apiece
  • Focus on ecosystem banking and to capture higher share of customer wallet with digital capabilities being central to all plans
  • These initiatives can result in a disproportionate impact on both top-line and bottom-line over the next 3-4 years
  • Expects marginal deteriorating in asset quality in the near term
  • Strong positioning on liquidity/capital enables it to grow balance sheet and maintain net interest margin

Emkay

  • Maintains ‘buy’ rating; hikes price target to Rs 600 from Rs 520 apiece
  • Made adequate investments in digital platforms
  • Management reassured its long-standing risk-calibrated growth strategy
  • Prospects for re-rating due to likely strong delivery on growth, asset quality and return ratios, coupled with its evolution as a strong retail-cum-digital bank
  • Key risks: Higher-than-expected non-performing assets formation in retail, slow growth and top management attrition

Motilal Oswal

  • Maintains ‘buy’ rating; raises price target to Rs 630 from Rs 525 apiece
  • Gaining market share with strong risk control
  • Technology remains the key growth driver
  • Firmly placed to deliver healthy sustainable growth
  • Remains one of the top ideas in the BFSI space
  • Estimates RoA/RoE of 1.7% and 15.2%, respectively, for FY23

Nirmal Bang

  • Maintains ‘buy’ rating; raises price target to Rs 590 from Rs 568 apiece
  • Expects net earnings to be further enhanced as credit costs taper down
  • Current non-NPA provisions are adequate, given restructuring and slippage expenses
  • Remains optimistic on the bank’s growth prospects
  • Besides the standalone entity, subsidiaries have immense growth opportunities in their respective industries
  • Subsidiaries are overall franchise value enhancers from a long-term perspective

Dolat Capital

  • Maintains ‘buy’ rating; hikes price target to Rs 585 from Rs 510 apiece
  • Asset quality risks lower than anticipated earlier
  • Lowers FY21/22 slippages estimate to 3.5% and 2.5%, respectively, from 4% and 3%
  • Revises FY21/22 earnings estimates upwards by 10-15%

Prabhudas Lilladher

  • Maintains ‘buy’ rating; raises price target to Rs 614 from Rs 520 apiece
  • Digital adoption already providing results in retail banking
  • Sees sustained double-digit return ratios by FY23
  • Remains preferred pick in the sector
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