Stocks to buy: ICICI Bank | Building retail franchise through digitisation

The second-largest private bank in India, ICICI Bank holds a dominant position in various financial services industries through its subsidiaries. Large and mid-sized corporations, MSME, agricultural, and retail enterprises are among the customer categories that the bank serves with its full range of financial services. Our expert team recommends buying this stock with a target price of Rs. 1125

Superior digital products that keep customers coming back

With robust features and easy access to digital channels, ICICIBC has introduced a number of digital advancements. These tools can give tailored solutions, enable data-driven cross-selling and up-selling, onboard new clients, and offer value-added services. These services are accessible to everyone since the bank has adopted an open architecture. In FY22, digital transactions accounted for almost 90% of both financial and non-financial savings account transactions. The bank is working to change its culture from one of client contentment to one of client delight and advocacy.

Building a precise retail franchise with the help of excellent digitisation

The bank has effectively maintained a strong liability franchise while seeing considerable increase in retail deposits. Over the period of FY17–22, total deposits and CASA clocked 17% and 16% CAGR, respectively. With a healthy CASA ratio of 48.7% in FY22. Continuous efforts to improve its digital platforms and streamline operations to give consumers a seamless banking experience aided the rise of its deposit franchise. The management aspires to maintain a sound and steady funding profile to provide benefits on the cost of funds even while its liability franchise is robust. The availability of high-quality, fine-grained low-cost deposits has helped ICICIBC keep a competitive edge over its competitors in terms of the cost of funding.

Investment rational

• At the end of June 2022, the bank's business had grown at an accelerated rate of 17% year over year to Rs 19,45,974 crore, with loans seeing an improvement to 21% at Rs 8,95,625 crore. In the meantime, the increase of deposits slowed to 13% at Rs 10,50,349 crore at the end of June 2022.

• The Bank's Net Interest Income (NII) climbed by a commendable 21% to Rs. 13,210.02 crore for the quarter that ended in June 2022. Interest revenue increased by 16% to Rs 23,671.54 crore, while interest costs increased by 11% to Rs 10,461.52 crore.

• At the end of June 2022, CASA deposits rose 16% year over year to Rs 49,2114 crore, while term deposits rose 11% to Rs 55,8235 crore. The bank's CASA ratio increased to 46.85% at the end of June 2022 from 45.90% at the end of June 2021, but decreased from 48.70% a year earlier.

• The bank's Net Interest Margin (NIM), which was 3.89% in the same period last year, increased sequentially to 4.01% in Q1FY2023. In Q1FY2023, domestic NIM increased to 4.14%, while global NIM remained unchanged at 0.33%. The bank's NIMs have been maintained by the bank's greater CASA ratio and credit-to-deposit ratio.

• As of June 30, 2022, it had a gross non-performing asset (NPA) ratio of 3.41 percent as opposed to 5.15 percent in the same quarter last year. From 0.76% in March 2022 and 1.16% in June 2021, the net NPA ratio decreased to 0.70% in June 2022.

• By the end of June 2022, the provisioning coverage ratio for NPAs was 79.6%. A total of Rs 1,144 crore, or 11.1% of core operating profit, and 0.53% of average advances, were set aside during the quarter. This includes a healthy 1,050 crore rupee contingency provision. By June 2022, the Bank would have contingency provisions in the amount of Rs. 8,500 crore, or roughly 0.9% of all loans.