Analysts give thumbs up to ICICI Bank after it came out with strong fourth quarter results. While most of them remained bullish on the stock, some even hiked the target price, as the private lender reported a 59-per cent jump in standalone net profit for the fourth quarter of 2021-22.

The stock on Monday closed 0.73 per cent higher at ₹752.80 on the BSE, after climbing 2 per cent to ₹762.20 during the day. On the NSE, the stock gained 0.97 per cent at Rs 754.95.

Analysts said that valuation gap between ICICI Bank and HDFC Bank will reduce further due to the former’s strong show.

Strong Q4 show

The private sector lender on Saturday reported a 59-per cent jump in standalone net profit to ₹7,019 crore for the fourth quarter of 2021-22 as against ₹4,403 crore in the corresponding January-March period a year ago. Total income of the bank rose to ₹27,412 crore in January-March from ₹23,953 crore in the year-ago quarter, ICICI Bank said in a regulatory filing.

Net interest income increased 21 per cent to ₹12,605 crore from ₹10,431 crore in the same quarter a year ago, it said.

On a consolidated basis, ICICI Bank Group's net profit jumped 58 per cent to ₹7,719 crore in March quarter from ₹4,886 crore in the year-ago period.

According to JPMorgan, ICICI Bank closing in on its valuation gap to higher-rated peers, re-rating potential has largely played out. “However, with steady delivery on growth, strong asset quality and low credit costs, we believe ICICI can continue to drive steady low-risk returns with consistent EPS compounding,” JPMorgan, which maintained its ‘Overweight’ stance with target price of ₹930, said.

'Healthy loan growth'

Management commentary alludes to continued healthy loan growth trends in retail, SME and business banking, said YES Securities. “While management stated that it aims to maintain margin, we think improving loan mix should aid piecemeal margin enhancement,” it said. The broking house, while maintaining ‘Buy’ rating on ICICI Bank, has hiked the target price to ₹1,043 from the earlier ₹1,030.

Racing ahead

Another domestic brokerage Emkay Global said ICICI Bank is now better placed than HDFC Bank.

"ICICI, trading at 1.8x FY24E ABV, has narrowed the valuation gap with close peer HDFC Bank (standalone: 2.2x/merged: 2x) at a faster-than-expected pace due to the former's strong core performance, with the latter struggling with management changes, tech issues and now the merger overhang".

The valuation gap has further room for reduction, as ICICI Bank sustains its core performance and HDFC Bank faces merger drag, it said, adding, “ICICI Bank’s top management premium has yet to be realised, and HDFC Bank may struggle to reclaim the management premium it had in the past”. The broking firm maintained its ‘Buy’ rating with unchanged target price of ₹1,025.

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