ICICI Bank shares hit new record after Q2 earnings. Is there more upside left?

ICICI Bank’s shares zoomed to a record high on Monday after India’s second-largest private-sector lender exceeded market estimates for quarterly earnings, and analysts said the stock still has some room for growth.

Shares of ICICI Bank surged 13% to a new peak of Rs 859.70 apiece on the BSE, before cooling off a tad to Rs 847. The shares are now up almost 120% from their one-year low of Rs 388.10 in October 2020.

The gains came after the bank reported a 30% growth in net profit for the second quarter through September to Rs 5,511 crore from Rs 4,251 crore a year earlier.

ICICI Bank also said its domestic loan book grew 19% on a year-on-year basis while the ratio of non-performing assets, or bad loans on the bank’s books, came down to 4.82% from 5.15% three months before. 

This helped the bank pare down its provisioning to Rs 2,713 crore from Rs 2,852 crore the previous quarter. 

The bank said that with economic activity rising, loan disbursements across all retail products increased sequentially. Mortgage disbursements were close to the level seen in the quarter ended March 2021, reflecting the increase in demand. Disbursements of personal loans and auto loans were also close to those levels, the lender said. 

ICICI Bank Q2: More highlights

1) Total advances grew 17% year-on-year to Rs 7.64 lakh crore in Q2.

2) Banking portfolio grew 43% year-on-year. SME segment registered 42% YoY growth.

3) ICICI Bank’s deposits increased 17% year-on-year to Rs 9.77 lakh crore in Q2.

4) Net NPAs declined 12% to Rs 8,161 crore as of September-end from Rs 9,306 crore in June 2021.

5) Recoveries and upgrades of NPAs, excluding write-offs and sale, increased to Rs 5,482 crore from Rs 3,627 crore on sequential basis.

6) Consolidated profit after tax, which included subsidiaries and associates, rose to Rs 6,092 crore from Rs 4,882 crore.

What do analysts say?

Many analysts and brokerage houses feel there is still some upside left for the ICICI Bank stock. CLSA, for instance, has revised its target on ICICI Bank to Rs 1,100 from Rs 1,000. Jefferies and Motilal Oswal expect the stock to touch Rs 1,000 while JM Financial has a price target of Rs 1,010 on the stock.

Motilal Oswal said after the results that ICICI Bank holds Covid-19 related provisions of Rs 6,425 crore. This gives it comfort on stable credit cost trends. The brokerage increased its estimates for FY22 and FY23 by 5% and 2.5%, and projects Return on Assets and Return on Equity of 2% and 16.6% by FY24.

Emkay said that the bank has been delivering strong retail growth of 20% year-on-year, while growth in the SME segment is also robust albeit on a low base. Corporate growth should revive soon, too, it said.

“ICICI—armed with its strong product offerings, franchise network and superior digital-banking platform—should deliver better credit growth and thus core profitability as well (21% CAGR in FY22-24E),” Emkay said.