Following Q1 results, ICICI Bank reached a new 52-week high. Should you buy, sell, or hold?

In early trading on the BSE on Monday, July 24, the share price of ICICI Bank increased by more than 1% to reach a new 52-week high of Rs 1,008. Private lender stated on Saturday that its standalone net profit increased by 40% to Rs 9,648 crore for the quarter ending in June 2023. This increase was aided by a decrease in bad loans and an increase in interest revenue. The Mumbai-based private sector lender reported a standalone net profit of Rs 6,905 crore in the preceding quarter.

What Ought Consumers To Do?

The majority of brokerage companies kept their favorable opinions of the company since the lender’s Q1FY24 results were better than they had anticipated. They continue to be optimistic about the company’s potential for expansion.

“ICICI Bank reported another consistent quarter, supported by stable asset quality, robust NII and core PPoP (pre-provision operating profit) growth, and regulated provisions. The consistent combination of a low-cost liability franchise and a high-yielding portfolio (retail/business banking) delivered continuous NII growth, according to Motilal Oswal.

The brokerage company said that ICICI Bank is seeing a robust recovery across sectors, and that asset quality trends are still favorable, with PCR hovering around 83%. Additional Covid-related provision cushion (1.2% of loans) offers more assurance.

We predict that ICICI Bank will generate returns on assets and equity of 2.2% and 17.9%, respectively, in fiscal year (FY) 25. “We estimate earnings growth to moderate to an 18% CAGR over FY23-25, affected primarily by a decline in margins and the limited levers available on the opex/credit cost front, after a strong outperformance supported by robust earnings growth (three-year CAGR of nearly 60%), said Motilal Oswal.

A target price of Rs 1225 per share has been set by CLSA for ICICI Bank, which is supported by robust growth and upbeat sentiment. “Over the next three years, the bank has the greatest earning certainty. Deposit accretion has accelerated but Net Interest Margin (NIM) moderation has remained consistent. The bank would invest in expansion in FY24 as the core pre-provision operating profit (PPoP) was reported to be 37 percent higher YoY. A fair earnings multiple for FY24/25 is 15.5/13.5x.

Additionally, ICICI Bank has received an overweight rating from Morgan Stanley with a target price of Rs 1350 per share. In Q1, the bank’s deposit growth rose to 18% YoY/5% QoQ. Strong domestic loan growth has been maintained in part by deposit expansion. Although the margin was seasonality-adjusted, the asset quality remained high.

JPMorgan has set a target of Rs 1150 and is also overweight on ICICI Bank. According to the brokerage company, ICICI Bank’s profit after tax (PAT) exceeded expectations due to fewer provisions. Core PPoP met expectations thanks to improved NIMs and loan growth.

The stock of ICICI Bank has returned 15.41% during the last six months. so beating the Nifty Bank index, which during the same time period has returned 7.82%.