Large private sector lenders ICICI Bank and Kotak Mahindra Bank posted their Q1FY23 earnings on Saturday, reporting strong growth across most business metrics.
Analysts have acknowledged the positive performance, continuing to recommend a ‘buy’ rating on the stocks. They, however, maintained price targets in the same range amid economic uncertainty, and other short to medium-term concerns.
On Saturday, ICICI Bank posted a 5 per cent jump in net profit to ₹6,905 crore and credit growth of 21 per cent. Meanwhile, Kotak Bank’s net profit rose 26 per cent on year to ₹2,071 crore, led by loan growth of 29 per cent.
“The management (of ICICI Bank) sounded confident about credit demand but with a cautious undertone given the inflationary environment and global disturbances,” Nirmal Bang Institutional Equities said in a note.
“Asset quality improved QoQ; still, the bank has continued to shore up contingent buffers,” the brokerage firm said, pegging the target price for the stock at ₹1,079. The stock closed largely flat today at ₹800.90 on the NSE.
Others highlighted the 25 per cent on-year surge in the bank’s operating expenses, fall in loan yields, and elevated slippages – even on a net basis – in the retail, rural and business banking segments.
For Kotak Bank too, analysts warned about the sharp 31 per cent uptick in operating expenses due to increased spending on technology and higher business volumes, slowdown in mobilisation of savings deposits, sluggish corporate loan growth, and higher treasury losses compared to peers.
Emkay Global Financial Services said that significant macro-slowdown leading to derailment of growth trajectory, and top management attrition remain key concerns for the bank. It retained a ‘buy’ rating on the stock with a price target of ₹1,827. Shares of the bank fell 1.7 per cent today to end at ₹1,795.55 on the NSE.
Others added that the bank’s succession plan will also be keenly eyed MD & CEO Uday Kotak is set to retire by December 2023 after the end of his current three-year term