Buy ICICI Bank; target of Rs 1700: Emkay Global Financial
Emkay Global Financial' research report on ICICI Bank
ICICIB reported some moderation in credit growth at ~12% YoY in 1Q, mainly due to slower growth in retail loans (incl mortgages and unsecured loans) and demand remaining slack in the corporate portfolio. That said, better yielding SME (reclassified) has been a key growth driver for the bank (up 30% YoY) and now contributes nearly 20.5% of its loan portfolio (nearly the same as the corporate portfolio size). The management highlighted that the bank’s SME portfolio is skewed toward high-ticket loans which, hence, does not pose much risk to asset quality for now, although the bank may face some growth pressure amid the ongoing trade war. ICICIB has lost market share in home loans due to higher pricing; however, it has realigned pricing in line with peers (Exhibit 15) which should help partly offset the expected growth normalization in SME. Overall, loan growth is expected to remain soft through FY26, prompting a cut of 70bps in our growth estimate to around 11.5% (though still better ex-Kotak). So far, it has shown margin resiliency vs peers which may contract amid the ongoing rate cut cycle, though it may continue to outperform peers given its better portfolio mix (asset/liability).
Outlook
Notwithstanding the near-term margin pressure across banks, as also for ICICIB (though lower), we believe the bank is well positioned to deliver peer-best RoA of 2.1-2.3% over FY26-28E, aided by better cost management, core fees, and contained LLP. This, coupled with credible top management, leadership pool, digital banking edge, and asset quality resiliency, should help the bank command premium valuations versus large-cap PVBs. Thus, we retain BUY while revising up our TP by 6% to Rs1,700 (from Rs1,600), rolling forward on 2.6x Sep-27E ABV and subs valuation at Rs270/sh.
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ICICI Bank - 03092025 - emkay
