The stock has underperformed benchmark indices in the last one year. It has given muted returns, up just 0.8 percent in the last 1 year as against a 5 percent gain in Nifty Bank and a 6 percent jump in Nifty. Meanwhile, in 2023 YTD, the stock has added 2.6 percent versus a 0.6 percent decline in Bank Nifty and over 5 percent rise in the benchmark Nifty.
It has been very volatile this year, giving positive returns in 5 of the 10 months so far this year and negative in the remaining 5 months. It fell 3.8 percent in October, extending losses for the third straight month since August, down 8.3 percent in this period. It rose the most in July, up 6.8 percent, and lost the most in January, down 6.6 percent.
Currently trading at ₹914.40, the stock is 9.3 percent away from its record high of ₹1,008.70, hit on July 24, 2023. It is trading 15 percent higher from its 52-week low of ₹796.00, hit on January 30, 2023.
However, in the long term – the last 3 years, it has given multibagger returns, surging 133 percent in this period.
Earnings
ICICI Bank, once again, posted stellar results, beating expectations. The earnings were accompanied by a significant reduction in bad loan provisions.
The private sector lender reported a 35.8 percent YoY rise in its standalone net profit to ₹10,261 for the second quarter of FY24 versus ₹7,557.84 crore in the year-ago period. Meanwhile, its net interest income (NII) increased by 23.8 percent YoY to ₹18,308 crore as against ₹14,787 crore in the same quarter last year. The net interest margin (NIM) for the bank rose to 4.53 percent in Q2FY24 from 4.31 percent, YoY.
Provisions during the quarter dropped to ₹583 crore from ₹1,645 crore a year ago, and from ₹1,292.4 crore in the previous quarter.
ICICI Bank’s asset quality demonstrated improvement as gross non-performing assets (NPAs) decreased to 2.48 percent of gross advances by the end of the September quarter, down from 2.76 percent a year ago. Similarly, its net NPAs, or bad loans, decreased to 0.43 percent compared to 0.61 percent in the year-ago period.
Is the stock a ‘buy’ at this juncture? Take a look:
Fundamental Views
Religare Broking: The brokerage retained its ‘buy’ call on the stock post its Q2 earnings with a target price of ₹1,252, implying an upside of 37 percent.
“We remain positive on ICICI Bank on the back of growing loan book, rising deposits franchise and improving asset quality. The provisions saw a decline during the quarter as the management expects asset quality to improve further. The bank’s NIM is expected to stabilize by FY24 which will accentuate the top-line growth. The digital push, healthy book quality and risk-calibrated approach will be other drivers of growth going forward. We expect NII/PPOP/PAT to grow at 18 percent/19 percent/23 percent CAGR over FY23-25E,” it said.
Emkay: The brokerage also maintained its ‘buy’ call on the stock with a target price of ₹1,375, indicating an upside of over 50 percent.
“We believe the recent stock under-performance has been mainly due to the senior mgmt.’s attrition/rejig dwarfing its otherwise strong financial performance. However, we take comfort from the strong leadership back-up at ICICIB and are hopeful the bank remains adaptive to limit the unwarranted attrition, as it aspires to build up into a “sustainable & profitable bank” in the long run. We have slightly tweaked our earnings estimates for FY24-26E by 2 percent, while we expect the bank to deliver superior higher RoA at 2.1-2.4 percent/RoE at 17-19 percent over FY24-26E. Notwithstanding recent underperformance, ICICIB remains our top pick in the banking space, given its superior returns profile, top-management credibility and strong capital/provision buffers amid rising stress,” stated the brokerage.
Sharekhan: The brokerage has a ‘buy’ call on the stock with a target price of ₹1,200, which implies an over 31 percent upside.
“ICICI Bank currently trades at 2.3x/2.0x its FY2024E/FY2025E core BV estimates. The bank reported another solid quarter, led by healthy credit growth and strong asset quality. NIM pressure is likely to persist in the near term, but we still see the bank delivering best-in-class performance in our coverage universe. From here on, only operating leverage can help to sustain a strong return ratio, which could be partly offset by lower NIMs and gradual normalisation of credit cost. We believe the bank is on the path of delivering a sustainable earnings growth trajectory with sustainable RoA at 2 percent,” it noted.
Motilal Oswal: The brokerage has a positive outlook on the stock with a target price of ₹1,120.
” ICICIBC reported another steady quarter, driven by healthy NII and controlled provisions underpinned by robust asset quality. The steady mix of a high-yielding unsecured portfolio and continued traction in BB, SME, and secured retail is enabling broad-based growth, which helps to retain business diversification. NIMs declined 25bp QoQ and the management expects the moderation to continue over the coming quarters. Asset quality remains steady as reflected in improvements in GNPA/NNPA ratios, while credit costs continue to undershoot. The additional COVID-related provisioning buffer at 1.2 percent of loans provides further comfort. We raise our FY24/FY25 EPS estimates by 3 percent/4 percent and expect ICICIBC to deliver FY25 RoA/RoE of 2.3 percent/18.3 percent. We introduce FY26 earnings estimates and expect PAT to grow at a moderate rate of 15-16 percent over FY25/FY26,” it explained.
Technical View
Rajesh Palviya, SVP – Technical and Derivatives Research, Axis Securities
“In the short and medium-term time frame, we observed distribution at higher levels around 1000-1950, which led stock downward. Currently, the stock is sustaining below its 20, 50, 100 and 200-day SMA, which reconfirms a short to medium-term downtrend. In the weekly time frame, the stock is hovering around the “up-sloping channel” support zone of 910 levels. Hence, any violation of the same on a weekly closing basis may cause some more price correction in the range of 870-800 levels. The immediate supply zone is placed around 930-960 levels. The daily, weekly, and monthly strength indicator RSI is placed negatively, which signals a loss of strength. We advised traders to adopt exit on rally strategy,” said Palviya.
Pravesh Gour, Senior Technical Analyst at Swastika Investmart
“The Counter has witnessed a breakdown of the head and shoulder pattern as well as the double top formation. It is forming a series of lower highs and lower lows, indicating a negative bias. The structure of the counter looks distorted as it is trading below all its important moving averages, which confirms a bearish trend. On the upside, Rs. 960 will act as a resistance level; above this, we can expect a long move towards Rs. 1000, while on the downside, Rs. 860 may be an important support,” Gour said.
The momentum indicator RSI (relative strength index) is also negatively poised, whereas MACD (moving average convergence divergence) is supporting the downtrend. This suggests that the counter may continue to fall in the near term, he added.
Ashwin Ramani, Derivatives Analyst, SAMCO Securities
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The banking major has cracked nearly 10% since making an all-time high of 1,009 on 24th July 2023. The stock took support from the 50% Fibonacci retracement level of 902, drawn from the low of 796 made on 30th January 2023 to the high of 1,009 made on 24th July 2023. The price has been consolidating around the 915 level since the last four trading sessions. The price took support from the same levels on 20th June 2023 and rose sharply until the all-time high levels. A fall from the current level can further intensify the ongoing selling pressure, which can take the stock until 830 levels, where the next crucial support is placed, said Ramani.
“The 50-day exponential moving average of the stock is placed around 950 levels and a strong close above the same can lead to the price moving north in the direction of its major trend for a minimum potential upside of 1000 levels,” he added.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 02 Nov 2023, 11:54 AM IST