ICICI Bank Ltd, with a 45 per cent climb this year that’s the most among a gauge of the nation’s financial stocks, has a recommendation consensus of 4.87 on a Bloomberg scale where 5 is a unanimous buy. That’s close to its highest reading in at least a decade. The lender remains a buy for all but one of the 57 brokerages compiled by Bloomberg.
“The stock has done well, yet we think the scope for meaningful re-rating over the next 12-18 months is high,” Anil Agarwal, an analyst with Morgan Stanley, wrote in a note on Tuesday, after attending the bank’s first analyst day in more than a decade.
The view comes amid a deteriorating economic environment where growth has slipped to the slowest pace in six years and the financial system continues to recover from a prolonged period of loan losses and a crisis at shadow banks.
Here’s a roundup of brokerage views on why they think ICICI shares are a buy.
Nomura (Adarsh Paras-rampuria): RoE target well entrenched; expect ROE of 16-17 per cent in next 12-18 months compared with bank’s guidance of 15 per cent by 1QFY21. Bank can continue to grow in most types of retail loans as market share is only 8 per cent of system’s assets in category. Estimate pre-provisioning operating profit, or PPoP, to record 19 per cent CAGR over FY19-22. Expect re-rating to continue with improving quality of earnings and lower credit cost.
Ambit (Pankaj Agarwal): Digitisation in retail banking to help improve PPoP and ROE by reducing operating expenditure, cost of acquisition. Linking top management incentives to overall performance of bank could lead to better performance. Bank can achieve 16.5 per cent ROE by FY21; remains buy with PT of Rs 526.
Citigroup (Manish Shukla): Bank is picking up business from better-rated companies. Emphasis on shorter and medium-term loans. Reduced chances of big loans turning bad, diverse range of products to allow it to grow balance sheet. Share price offers a reasonable risk-return trade-off; business offers meaningful upside in medium term. ICICI Bank is top sector pick; PT raised to Rs 600.
—Bloomberg
